The MEA has a wholly-owned subsidiary, the Michigan Education Special Services Association (MESSA), which provides health care benefits to a majority of Michigan school districts. In 1992 the Mackinac Center for Public Policy followed up on complaints from parents, taxpayers, and school officials regarding the excessive cost of MESSA benefits, and the fact that one school district selected MESSA benefits instead of a less expensive provider.
In 1993 the Mackinac Center issued a report that revealed how and why the MEA pressures school districts to buy MESSA insurance, even if policies are available at lower rates from other providers. MESSA pays the MEA for its "marketing" services, retains an unusually high administrative fee for itself from the premiums the schools have paid, and then turns the remaining funds over to the actual insurance underwriter, Blue Cross/Blue Shield of Michigan. The MEA has fought every effort to open the process up to fair, competitive bidding and has even refused to provide client school districts with the claims information necessary for a district to shop for the best insurance arrangement.
The exhaustive, 64-page report documents that MESSA’s costs are excessive and its practices are secretive, coercive, and monopolistic. Until the legislature in 1994 gave school districts more control over their health insurance costs, MESSA even routinely changed health benefits (and thereby boosted costs) without the consent of the districts who pay the bills.
One reason the MEA pushes school districts so hard to purchase MESSA benefits is that the MEA profits from the health care premiums districts pay. Through complex transfers of money and services to a for-profit subsidiary, the MEA uses MESSA resources to bolster its political and organizational strength. Most school board members are unaware that when they purchase MESSA benefits they are actually helping to strengthen the union that opposes them at the bargaining table.
Based on the concerns identified in the Mackinac Center report, the Michigan Insurance Bureau launched an audit of MESSA and its relationship with the MEA. The MEA immediately sought and received a gag order preventing the Insurance Bureau from making its findings public. In 1994 the Insurance Bureau refused a MESSA rate request because, as the Mackinac Center claimed, MESSA was charging school districts excessive administrative fees. The Insurance Bureau also ordered MESSA to return approximately $70 million of excess reserves to Blue Cross/Blue Shield, which MESSA was holding and earning interest on.