Why Do School District's Purchase MESSA Insurance?

When MESSA published its premium rates for 1993, the rates were typically lower than similar rates charged by Blue Cross--which competes against MESSA, as well as underwrites its coverage--for the second plan year in a row. This phenomenon is somewhat ironic, because for the plan years prior to 1991-92, MESSA insurance was considerably more expensive than Blue Cross insurance. Some school districts have been led to believe that they are actually receiving a good deal from MESSA. The Saginaw School District, for example, chose direct Blue Cross coverage in 1990 and saved over $1 million per year compared with MESSA. Even though the insurance benefits were not entirely comparable to MESSA, the District and the Saginaw Education Association agreed to the package. According to testimony before the House Appropriations Committee, the monthly cost of full family coverage for a teacher in the Saginaw School District was $442.69 through MESSA .43 Coverage purchased directly from Blue Cross would have cost $299.25. In June of 1993, the Saginaw District became a MESSA customer when Blue Cross premiums rose 22 percent from the previous year, costing the District an additional $600,000 over MESSA coverage.44 Even though MESSA has now become less expensive than Blue Cross for reasons that are not immediately clear, school districts must weigh the short term benefits against the long term costs.

While it is generally more practical to purchase the less expensive plan, school districts cannot afford to let prices deceive them. Lower rates do not pardon the waste of MESSA insurance programs. There is savings in the short run, but there could be even more savings if MESSA provided more efficient benefit packages and was more mindful of school district budgets. In addition, school districts must remember that MESSA has substantial cash reserves and investments which would allow it to subsidize premiums at a rate lower than Blue Cross even if MESSA actually cost more than Blue Cross. MESSA could also charge more in one school district in order to charge less in another. Some have speculated that MESSA is not cheaper in the long run; that MESSA is allegedly enticing districts with low initial rates, only to hike up the rates once its insurance plans are secured by contracts. In addition, school districts can often become locked-in to MESSA insurance. The process for arranging new coverage outside of MESSA is tedious and difficult, and often times impossible. Public school employees have demonstrated a willingness to accept reduced wages in order to maintain MESSA coverage.

School districts must accept their fair share of the responsibility for the impact of MESSA on the cost of public education, as long as they continue to acquiesce to the excessive employee insurance benefits provided by MESSA. While several school districts have, vocally expressed reservations about MESSA, many districts are culpable to the extent that they have failed to effectively combat MESSA. For example, a prime reason costs for school districts have increased is that districts often negotiate the design of benefits provided to their employees by making comparisons to neighboring school districts. But if neighboring school districts also purchase MESSA insurance, then of course school districts will obtain inflated comparisons of benefit designs in similar districts. A more objective basis of comparison would be the benefits offered by similar employers in the school district's region.

Part of the reason for the acquiescence of many school districts to MESSA is the influence of the MEA. In the vast majority of districts, superintendents and business managers maintain control over district operations. Many of these officials are former teachers and therefore former members of the MEA. The MEA cultivates these relationships and enjoys the favor of many district officials. Consequently, there are very few strong superintendents with the willingness to resist MESSA and the MEA.