School districts that banded together to form a regional health
insurance pool in southwest Michigan say they are saving an average of 7 percent
on insurance costs, and the number of districts in the pool has jumped from nine
to 29. A consultant working with the pool members says his company now is
exploring similar ventures in other parts of Michigan.
The West Michigan Health Insurance Pool was established by the
public school districts and intermediate districts in 2005 in an effort to save
money on health care coverage through a self-insurance plan. In most districts
the pool covers administrators and other nonunion support staff, today totaling
about 1,700 employees, according to Doug Derks, area vice president for Arthur
J. Gallagher & Co. His company is an employee benefits services firm hired by
the districts to establish the pool and serve as a consultant. Derks is the
former assistant superintendent for business of the East Grand Rapids school
district, a position he left in January 2006 to join Gallagher.
"I would say it (the average savings) is just over 7 percent,"
Derks told Michigan Education Report. "They have the security of being a large
company and the cost savings as well." At this point most of the savings are in
administrative costs that each district faced by handling insurance programs
"It’s been a good process. Everybody I have talked to is happy
with the services," said Michael Cuneo, assistant superintendent for finance for
Rockford Public Schools. Approximately 63 employees in Rockford are covered
under the new program, which is saving the district about $40,000 this year. "We
were looking for a more cost-effective way to provide health insurance … while
Each school district in the pool sends a
representative to a governing board that oversees the insurance
Cuneo estimated that his district saves about 5 percent on the
program compared to purchasing insurance from MESSA, the Michigan Education
Special Services Association. MESSA, a third-party administrator affiliated with
the Michigan Education Association, a school employees union, sells insurance to
a large number of Michigan school districts. The amount of savings could go up
or down in the future, Cuneo said, depending on the market and claims. "The big
thing is that school districts have a little more control over the actual group
Each school district in the pool sends a representative to a
governing board that oversees the insurance program. "The intent is to have the
school districts as managing partners," Derks said. His company handles filing
required documents with the state.
South Haven Public Schools also is pleased with the program,
saving approximately 10 percent on insurance premiums for administrators and
non-certified staff during its first year in the pool, according to Robin Mock,
business office supervisor. The district formerly purchased insurance for those
groups from the School Employers Trust and School Employers Group, or SET SEG.
The pool gained statewide attention in 2005, when the Michigan
Legislature took up a package of bills designed to reduce health care costs for
public schools in several ways. Senate Bills 895-898 passed the Michigan Senate
in December of that year, but never came to a vote in the House of
Representatives. In November of 2006, former Senate Majority Leader Ken Sikkema,
R-Wyoming, called on legislators to complete the work, saying it could save
schools up to $570 million in the first three years.
The package of bills would have made it easier for districts to
form regional insurance pools like the one in west Michigan. Such pools, called
"multiple employer welfare arrangements," or MEWA, are already allowed, but
supporters say the regulatory process is lengthy and burdensome. Another piece
of the package would have required the release of claims experience data for
each school district. Supporters said that knowing a district’s past experience
would make it easier for other companies to prepare accurate competitive bids,
which in turn would bring prices down.
Opponents have said that forcing insurance companies to release
claims data would allow companies to "cherry pick" only low-cost districts for
insurance coverage. They also said that, as proposed, the legislation making it
easier for school districts to form insurance pools could put districts at risk
by not requiring the same safeguards that are required under the Michigan
insurance code. That code includes protections like requirements for adequate
reserves, oversight and financial reporting.
"Overall, MESSA does support pooling … as a good way to spread
risk," Gary Fralick, MESSA director of communications and government affairs,
told Michigan Education Report. But he said that while the existing statute
allowing multiple employee agreements has been praised nationally for its
consumer protections, the new legislation would have "lessened the reserve
requirement … and lessened the consumer protections," for school districts and
"We think that some of the current legislation has
been onerous for public institutions."
Gallagher & Co.
"At the end of the year, if they’ve had medical bills higher
than expected, school districts (in a pool) could see a bill," he said.
Some districts have saved money not by joining a pool, but by
switching insurance plans or companies. Michigan Education Report noted a year
ago that a number of districts have moved to a less-expensive MESSA plan called
Choices II, to increased deductibles or co-pays, or to a different company
If MESSA had not developed options like a preferred provider
plan, "We would probably have 20 percent fewer members," Fralick said. "We are
susceptible to market forces like anybody else."
Contract negotiations in 2006 in Bay City Public Schools
resulted in the district switching carriers from MESSA to Blue Cross Blue Shield
of Michigan for administrators and support personnel, according to Doug
Newcombe, director of finance. Teachers shifted to the less-expensive MESSA
plan, although they have the option to retain MESSA’s more expensive program,
SuperCare, if they pay the difference, Newcombe said. All employees now pay more
out of pocket for prescription drugs.
It’s too early to know precisely how much the district will save
under the changes, Newcombe said, but the early estimate is approximately $2
million. The district has 500 teachers and 400 additional staff members in all
areas. At about 9,500 students, the savings could equal $210 per student.
It is likely the health insurance issue will resurface in the
Senate in 2007, according to Matt Marsden, spokesman for Senate Majority Leader
Mike Bishop, although few details were available when Michigan Educationn Report
went to press.
At this point, "all of those bills are dead and would have to be
introduced" for consideration in 2007, according to Sen. Nancy Cassis, R-Novi, a
member of the Senate Education Committee and also chair of the Senate Finance
Committee. Cassis told Michigan Education Report she supported the bills at the
time and would again. There is little question that, "Any new money going into
education now is not getting into the classroom," she said, but rather to health
insurance or pension costs.
Similarly, House Republican Leader Craig DeRoche said he expects
the Legislature to revisit the issue, but added, "Much of the reform that is
needed can be done in the private sector." Bringing more insurance companies
into the market would introduce more competition and cost savings, without state
regulation, he said. "The ideal solution, to me, would be private sector markets
brought in that would offer dynamic alternative choices."
DeRoche told Michigan Education Report he understands the need
for legislation making it easier to form self-insurance pools like the West
Michigan program, calling it the "most important element" of the reform package.
"We think that some of the current legislation has been onerous
for public institutions," Derks said. The laws allowing formation of multiple
employer arrangements was intended for private industry and includes safeguards
that aren’t needed with established public institutions like schools, he said.
Cassis said she believes more districts are taking the step of
seeking competitive bids on health insurance than in the past. "It’s an issue of
negotiation between the teachers union and the school board and administration."
That idea is supported by a statewide survey by the organization
of Michigan School Business Officials. The April 2006 survey invited school
districts to report on how many insurance carriers they use and whether they
have added any since 2000. Of the 284 districts responding, 46 percent said they
had added a new carrier or changed insurance plans within the same carrier. The
same number said they solicit bids for insurance in preparation for collective
It is unreal to me that so many of us taxpayers continue to fund MESSA’s insurance without any competition. The schools claim they have no money but it’s all going to MESSA. Kudos to the districts that have the courage to get competing bids and pool their resources.
- Donna Gundle-Krieg, health resource consultant, University of Michigan Health System