A version of this commentary was published in The Detroit
News on Aug. 24.
A proposal in the Michigan Senate would establish a state-run
health insurance pool for all Michigan public school employees. This plan,
according to the much-discussed Hay Group report released in July, could save
the state between $146 million and $281 million in this school year alone.
However, a statewide health insurance pool is at best a
partial solution that carries risks of its own. A better solution is to make it
possible for school districts to shop around for employee health insurance by
giving them access to their general claims history — the same access any other
employer would have.
But districts typically cannot access such data because MESSA,
Michigan’s largest administrator of school employee health insurance benefits,
frequently refuses to provide it. MESSA was established by the Michigan
Education Association, the state’s powerful school employees union, and as a
widely publicized 1993 study by the Mackinac Center for Public Policy noted, the union long used mandatory collective bargaining to pressure school districts to
purchase MESSA coverage. The MEA is technically prohibited from doing that now,
but MESSA still withholds aggregate claims information that would permit
districts to solicit bids from MESSA’s competitors.
The savings could be considerable: In 2004, the most common
MESSA family plan cost $15,834 per year for each employee, while the typical
employer-paid family policy nationwide was $9,602. By one estimate, open
competition could save Michigan school districts as much as $400 million each
In contrast, a state-run school employee health insurance
system, despite diminishing MESSA’s inflationary influence on insurance costs,
is an imperfect solution. It would put billions of health insurance dollars
under the control of a politically appointed board, and it would centralize
benefits choices, thereby allowing lobbyists to manipulate a single entity, the
state, rather than negotiate with hundreds of local districts. Because districts
would be required to participate, competition would be limited even further than
it is under the current system.
School districts can confront rising health care costs by
opening the process to competition. MESSA should be able to compete, of course,
but it should be required to provide a district’s aggregate claims data — just
as the state’s other insurers do — while protecting individual privacy. A bill
in the state House would mandate such disclosure, and this proposal is more
likely to reduce the schools’ health insurance costs in the long run.
Ryan S. Olson is director of education policy the Mackinac
Center for Public Policy, a research and educational institute headquartered in