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The initial reason why MESSA has cornered the market for administration of insurance benefits to public school employees is because the state of Michigan has fundamentally outlawed competitive bidding of insurance plans in school districts. The 1981 court ruling in the case of Houghton Lake Education Association v. Houghton Lake Board of Education determined that school districts have a duty to negotiate with the teachers' union over the amount of insurance benefits given to school employees along with the specific company which will administer the benefits.24 Ever since the ruling was handed down, the impact on public education has been detrimental, because it cleared the way for an insurance administrator supported by a teachers' union to dominate the market without regard to cost.
The process of negotiating insurance benefits usually begins with the school district and the teachers' union individually choosing the amount of benefits and an administrator of those benefits. These decisions become the focal point of their discussions. Due to the fact that a school district cannot contract with a quality, cost-effective insurance administrator on its own, firms must compete with one another for the favor of both the district and the teachers' union. School districts tend to favor those firms which can deliver the agreed upon benefits at the lowest possible cost, but since MESSA is a subsidiary of the MEA, the teachers' union will always favor its own administrator of insurance benefits. The union typically has little concern about costs, because the school district picks up the tab for insurance benefits.
When the time comes for the union and the district to negotiate the administrator of insurance benefits, the MEA consistently pushes for MESSA. The MEA even requires that its bargaining agents attempt to obtain MESSA coverage for a school district's employees whenever contracts come up for renewal. Consequently, school districts are unable to bargain on a level playing field with the union over insurance benefits. 'Me teachers' union can simply bargain MESSA coverage into a labor contract under the threat of strikes or prolonged negotiations.
School boards throughout the state recognize that any threat to MESSA is grounds for a strike by the MEA. Unfortunately, the state of Michigan generally does not enforce its own laws as they pertain to strikes by public school employees. The Public Employment Relations Act which governs the conduct of the MEA explicitly makes it illegal for public school employees to strike. Yet, teachers strike with regularity and are rarely penalized for their actions. In this sense, the strike option gives authority to the MEA for imposing MESSA insurance plans against the will of school districts. After all, school districts rarely have the power to combat a force of striking employees. This gives MESSA a considerable advantage in the bargaining process, which prevents many school districts from seeking more affordable insurance administrators. In fact, the few eligible school districts which do not have MESSA coverage are those that have the unusual strength and resources to resist the MEA.
The loss for school districts is that they cannot control the costs of employee insurance, because they must decide their insurance administrator in conjunction with an organization that cares more about benefits than costs and has the bargaining leverage to impose its will over school districts. For example, in addition to demanding MESSA insurance plans, the MEA also insists that school districts not minimize their cost liabilities by setting a limit on annual premium payments.25 This gives MESSA the flexibility to increase premiums with the guarantee that school districts will have to make payment. Since other insurance administrators cannot contract with the dominant bargaining agent as can MESSA, any competition to MESSA is nudged out of the market, which also hurts school districts by forcing them to patronize an administrator that has no incentive to price competitively.
The superintendent of the Hemlock School District demonstrated the typical concern among school administrators about the absence of competitive bidding and the presence of MESSA:
Rising health costs represent the most inflationary and uncontrollable line item in all school budgets. One of the main problems is that school districts have bargained certain carriers into their master contracts, which eliminates the competitive bidding process. We believe legislation should be enacted that would supersede any such contractual language and require school districts to put their insurance out for bid on a required cycle and award to the lowest qualified bidder. This is an oversimplification of a somewhat complex and highly political problem in that MESSA (MEA) is the major health-care insurance provider in our schools. 26
As long as the MEA can bargain for its own insurance provider, school districts will continue to suffer and MESSA's competitors will not have a realistic chance of actually vying for school district business.
