A "frequently asked questions" feature on Gov. Jennifer Granholm’s Web page says Michigan faces a potential $350 million shortfall in the state school aid fund. A 2005 report by the Hay Group, however, says public schools could save $422 million annually by 2010 if the Legislature would amend laws regarding health insurance for school employees.

Cynthia Irwin, executive director of the Michigan Education Special Services Association (MESSA), wrote in the Feb. 13, 2007 Detroit Free Press that teachers and other school employees are not to blame for higher insurance costs and have "sacrificed wage increases," to help schools balance their budgets.

Indeed, some school employees willingly sacrifice wage increases in order to keep MESSA. The support personnel union in the Vicksburg schools, for example, chose to keep MESSA and take a 0.48 percent pay raise, rather than switch to a less expensive plan and receive a 3.75 percent raise.

But there is more to the story. MESSA, which was founded by the Michigan Education Association school employees union, does not underwrite insurance on its own, but rather acts as a middleman in purchasing and repackaging Blue Cross Blue Shield plans to sell to school districts. The Kaiser Family Foundation reports that the average health insurance plan nationwide costs employers $11,900. School districts have been known to pay upwards of $16,000 a year per employee with MESSA.

The MEA must file a yearly report called an LM-2 with the U.S. Department of Labor. The MEA’s 2006 report shows that MESSA transferred $4.88 million to the MEA. What the transfer paid for is unclear, but is perhaps best explained by a 1998 Michigan Supreme Court statement: "The MEA is the exclusive agent for the MESSA and markets its products during the collective bargaining agreement. The MESSA pays the MEA for its services, which contractually … obligates school districts to provide MESSA products. …" (This $4.88 million is small, however, compared to the $70 million in excess reserves that the Michigan Insurance Bureau made MESSA return to Blue Cross in 1994).

Irwin says that because employees have been willing to accept less expensive health plans they have helped save schools an estimated $268 million. These savings occurred only after school boards began exerting strong pressure to reduce costs, yet most of these less expensive health plans are still offered by MESSA. Thus, if MESSA weren’t championed by the MEA, the health plans might have been provided by other administrators, and the savings could have been much larger for comparable benefits.

Irwin goes on to mention that 24,000 union employees have accepted prescription drug plans with copayments of at least $20, while 42 percent of MESSA members actually pay a portion of their own monthly health insurance premium. While such concessions seem striking to Irwin, they are in fact modest considering that most private-sector employees have faced similar or larger health insurance costs for decades. Note that a far greater number of MESSA members — 58 percent — do not pay anything toward their own health insurance.

Although almost half the school districts in Michigan sought bids for health insurance last year, MESSA continues to be the only game in town for roughly 75 percent of school districts, covering about half of all school employees statewide. School boards have a responsibility in this, too. The Michigan Public Employment Relations Act says school boards have a management right to declare themselves the policyholder, and such a decision is a prohibited subject of bargaining. Doing so would ensure that school districts have access to aggregate claims data and allow them to shop for quality health care at a more competitive price. Currently, MESSA will not provide that information, meaning school boards cannot seek specific bids from other providers. It’s like trying to buy carpeting for your living room without knowing the square footage.

When contract time arrives, MESSA is usually the most contentious issue on the table. Holland Public Schools Superintendent Frank Garcia told the Mackinac Center that in 18 months of bargaining with the teachers union, "In a roundabout way, 99.9 percent" of the talks were about MESSA. Indeed, the MEA’s allegiance to MESSA sometimes causes union leaders to accept layoffs of their union brothers and sisters in order to keep it. In the Hartland Community Schools, for example, the teachers union steadfastly refused to discuss a change in insurance that could have saved the district $600,000. The school board instead did the financially responsible thing and privatized custodial services to cover a budget shortfall.

Not all teachers are so willing to march in lockstep with the MEA. In 2006, teachers in Pinckney voted overwhelmingly – 97 percent – to abandon MESSA altogether, saving the district about $800,000 and maintaining current staffing levels. And it’s not just teachers who are walking away from MESSA in an effort to help districts save: Administrators in the Whitehall schools dropped MESSA, cutting their insurance costs 22 percent. In return, they were able to obtain 3 percent raises for three consecutive years, and the district agreed to provide each person with a $4,000 account that can be used to pay for deductibles.

The mantra that schools are underfunded rings hollow when a cozy MEA-MESSA relationship hinders proven, cost-effective answers to the problem of rising school employee health care costs. School districts and teachers should consider ways to independently and cooperatively seek reasonably priced health insurance without union interference.

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Ted P. O’Neil is a communications associate with the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.