Michigan school districts in a tight financial situation should consider every realistic opportunity for savings, especially those that can be pursued without reducing the quality of education.
Health care benefits for teachers and other public school employees have been made far more expensive than necessary due to the Michigan Education Association (MEA), and the political and economic power of its insurance arm, the Michigan Education Special Services Association (MESSA). This makes health care costs a prime candidate for savings, as school boards consider how to save a significant amount of money without dismissing teachers.
Unfortunately, there are formidable obstacles to overcome. With an income last year of as much as $900 million, and an implacable determination to protect its market niche through strikes and other methods, the combination of the MEA and MESSA utterly dominates the health-insurance landscape when it comes to public school employees.
MESSA is a "third-party administrator", meaning that it does not provide insurance itself — it merely repackages benefits that are actually provided by Blue Cross/Blue Shield of Michigan. MESSA acts as a go-between, selling health care plans to school districts, collecting premiums, and administering benefits.
MESSA coverage is extremely generous but also very expensive. While it thus makes perfect sense for school districts to look at savings in this area, any school board that considers other insurance must be prepared to face at least the threat of an employee strike. And it must also deal with the fact that it cannot provide a prospective insurer with the claims data the insurer needs to make an accurate assessment of costs.
The Claims history — a summary of what health care services were actually used by the client’s employees under the current insurance plan, — is what allows a new insurance provider to estimate the actual health care needs of the people they will be covering, and in turn frequently allows them to lower their premiums. Almost all insurers provide such claims data to their clients.
But MESSA, alone among Michigan health insurers or third-party administrators, provides only "regional" — instead of employer specific — claims information. MESSA’s refusal to provide claims histories for individual school districts makes it much more difficult for insurers to put together bids that can compete with MESSA. By offering only regional claims data, MESSA managed to subvert 1994 legislation that was intended to secure each district’s right to this information and open up health insurance to competition. Without competitive bids, school districts must stay with insurance it knows is a budget buster.
But that doesn’t mean that every now and then, some school districts don’t try. In July of this year, Clare public schools contacted Bailey Insurance of Royal Oak to discuss alternatives to MESSA. Not possessing the data typically used to assemble a traditional insurance plan, Bailey was able nevertheless to make an arrangement, also through Blue Cross/Blue Shield, that would have saved the district nearly $500 per employee annually, while maintaining modest deductibles and full coverage, including vision, dental, and mental health care.
Unfortunately, although contract negotiations are continuing, sources close to the talks indicate that the district is unlikely to adopt the Bailey health care program.
Yet, if Clare and other school districts were able to break MESSA’s hold on their pocketbooks, and if they tried to match the coverage and terms typically found in private sector employment — rather than attempting to match MESSA’s coverage — they could achieve savings of as much as 20 percent.
The MEA, for its part, has indicated that it is willing to go to extreme measures, including going on strike, to maintain the status quo on health care. The most recent example involves four Grand Rapids-area school districts that have taken the modest step of proposing that teachers contribute a portion of the cost of health care. If this proposal were adopted, teachers in these districts would have a motivation to consider lower-cost alternatives. In order to protect MESSA from that economic pressure, MEA officials have already begun laying preparations for illegal teacher strikes in the four districts.
In short, the MEA and MESSA have set up an obstacle course that prevents public schools from introducing competition for teachers’ health care coverage. Coverage, copays, and other terms of a health care benefit program, like all terms of employment, are a legitimate subject of collective bargaining. The MEA, however, has no right to dictate that schools purchase health insurance from the union’s own preferred provider, especially in the difficult economic condition that many school districts face.
The Michigan Legislature would do teachers, school districts, and children a huge favor by crafting legislation dictating that school districts must solicit bids on health care coverage, and that district-specific claims histories must be made available to them.
By finishing the job they started in 1994, when they attempted to ensure that school districts would get appropriate claims histories, and opening the door to a competitive market in health care for Michigan schools, lawmakers would enable school districts to overcome the obstacles placed in front of them by the school employees’ union, and to save teachers’ jobs.