In almost every case, MESSA insurance benefits are provided to public school employees because the teachers' union and the local school district have agreed to a MESSA insurance plan in their labor contract. In some instances, the school district will also purchase MESSA coverage for administrators and other non-unionized employees. Once the district and the union have agreed to a specific MESSA insurance plan, the school district enters into a contract with MESSA and becomes a "customer" of MESSA. The role assumed by MESSA is that of the middleman: Rather than have insurance benefits administered directly by an underwriter, the school district purchases its insurance through a third party. This practice is quite common among school districts.

Anyone who is covered by a MESSA plan is called a "member" of MESSA. Membership is restricted to past and present employees in public education, including teachers, administrators, and support personnel. Specifically, the MESSA membership criteria state that eligible participants must have some relation to the teachers' union, either as members of the MEA, employees of the MEA and its subsidiary corporations, employees of school districts where the MEA has bargained MESSA benefits for its members, and qualified retirees of the public education sector.

In effect, MESSA operates as an insurance agency servicing public school employees throughout the state of Michigan, with representation of commercial carriers including the Equitable Life Assurance Society, Delta Dental, Blue Cross/Blue Shield of Michigan, and Lincoln National Life. In fact, the Michigan Insurance Bureau reports that MESSA is licensed to perform the activities of an insurance agent.

Premiums for MESSA insurance are collected by MESSA from customer school districts on a monthly basis. A handful of members also purchase insurance from MESSA on their own without the intervention of a school district. The premiums for MESSA coverage are based upon actuarial calculations of the financial risk assumed by the underwriter and MESSA's anticipated costs of administration. According to MESSA, it now covers some 80,000 public school employees and 200,000 of their dependents with annual premiums of approximately $360 million.

In its capacity as a third party administrator, MESSA is first responsible for designing the various benefit structures of its insurance plans. Once a plan has been created, MESSA locates an underwriter for the plan and enters into an operating agreement which identifies the terms for compensation and the division of administrative responsibilities. After receiving monthly contributions from its customers, MESSA pays a separate premium to the plan's underwriter as the purchase price of actual coverage against losses for its members. MESSA also deducts certain allowances from its total revenue collections for the costs of administering benefits.¹¹ Among its principal administrative duties, MESSA performs eligibility determinations, enrolls and counsels participants, handles certain claims for losses, establishes the claims appeal procedure, and collects premiums. However, MESSA is not the exclusive administrator of its insurance plans. In the case of its health plans, for example, MESSA and Blue Cross/Blue Shield of Michigan co-administer the programs, with MESSA and Blue Cross both processing specific claims.