Battle lines are being drawn over Michigan’s new Public
Employees Health Benefit Act, as public school districts report they are unable
to obtain from a Michigan Education Association affiliate the information they
need to seek competitive bids for employee health care.
Enacted late in 2007 as part of a deal to resolve a state budget
deficit, the new law requires public school districts to seek competitive bids
for medical benefits plans and makes it easier for schools and other public
employers to form health insurance pools.
The law also requires insurance companies and third-party
administrators that currently work with school districts to release aggregate
information about each district’s past medical claims and costs. That claims
history is supposed to be made available to individual school districts, which
then are supposed to provide the data to any competitor who wants to bid for the
district’s business. The idea is that more competition in the school health
marketplace will bring down costs.
But the Michigan Education Special Services Association, the
third-party administrator that sells health insurance benefits to about half of
Michigan’s education market, now says it can’t provide claims data to individual
In letters responding to districts who asked for their claims
history, the association wrote that, "Due to our business model, MESSA has never
maintained claims experience data on an individual school district or group
basis." The letters go on to say that the association will begin compiling the
necessary data as of Dec. 1, 2007, as required under the act. MESSA was
established by and is affiliated with the Michigan Education Association.
"What they basically said is, ‘We don’t keep that kind of
information,’" Reed City Public Schools Superintendent Steven Westhoff told
Michigan Education Report. "I wasn’t too pleased."
MESSA officials did not respond to a request for comment for
Similarly, Blue Cross Blue Shield of Michigan told Reed City
that it was unable to provide claims history data because the MESSA pooling
model "does not maintain data needed to separate out groups and membership
history information." MESSA insurance plans are underwritten by Blue Cross Blue
That puts school districts in the awkward position of being
required by the new law to seek bids and also to provide claims data that they
don’t have, said Tom White, executive director of the Michigan School Business
"It’s holding up (employee contract) negotiations and it’s
frustrating people," White said. "To get the best product at the best price, we
need the data."
The contract between Reed City teachers and the school district
expires in June, and Westhoff anticipates that contract negotiations, including
negotiations over health benefits, will begin this spring. After receiving the
letter from MESSA, he also sought the claims data from the Reed City Education
Association and was told it "has no control over such information."
At this point, he said, the district plans to request claims
data from MESSA for December of 2007 and the first three months of 2008 in order
to have bids available during contract talks, but he isn’t sure how useful that
will be to bidders. Reed City currently participates in MESSA’s Choices II, a
preferred provider health plan.
"I think it’s kind of a game," Westhoff said. "It’s kind of like
they (MESSA) have bought themselves … time."
"Schools are always put into these rocks and hard places," said
Raymond Telman, executive director of the Middle Cities Education Association, a
group representing urban public school districts. "What’s the enforcement
mechanism? I don’t know."
Staff members of state Sen. Wayne Kuipers, R-Holland, and Sen.
Mark Jansen, R-Grand Rapids, both sponsors of the legislation, were to meet in
mid-January to discuss the matter, a staff person in Kuipers’s office said, but
further details were not available before deadline.
White and Westhoff both were skeptical of claims that the data
was not available at the district level.
"Blue Cross is sending bills to school districts with
individuals’ names on them. My guess is they have the capacity to do this,"
Priority Health, an insurance carrier based in Grand Rapids that
sells a variety of insurance products to 25 Michigan school districts, said it
is responding to customer requests for data and looks forward to bidding for
business in other districts.
"We have decided we are going to comply with the letter of the
law as well as the spirit of the law," said Amy Chambers, director of consumer
engaged healthcare products. "It takes some effort, but you can do it."
"Having the kind of claims information that Public Act 106 sets
free is going to be very valuable for the carriers and for the school
districts," she said. "From the school perspective, this information is going to
be gold for them. That’s going to give them ammunition to bargain for the best
costs and services."
Asked if Priority Health will submit bids in districts where
claims data is lacking, Chambers said it depends on the product.
"For a few of our programs, we would need actual claims data,"
Without knowing the claims history in a given district,
insurance companies or third-party administrators are likely to bid high,
building a safety factor into their numbers, said Jim Miller, director of sales
and marketing for the School Employers Trust and School Employees Group. SET SEG
oversees a group of non-profit entities that offer insurance products to
Michigan schools. SET SEG is now offering consulting services to schools on
health insurance bidding and has given a number of presentations to school
administrators throughout the state about the new law.
"There are schools bidding out, but the problem is they’re
bidding without claims data. Some of them are getting bids back, but they aren’t
competitive," Miller said.
MESSA and the MEA, the state’s largest school employee union,
fought hard against the new statute, asserting that there is no evidence that
pooling will save money on school employee health care and that releasing claims
data by individual district will encourage insurance companies to offer bids
only to "healthy" districts.
MESSA plans are extremely popular among teachers in some school
districts, with teachers citing the high quality of both benefits and service.
But the cost of these plans is also high. In a number of districts in recent
years, union negotiators have agreed to give up pay raises in exchange for
maintaining MESSA coverage. Many more have agreed to switch from MESSA’s most
expensive plan to its less costly preferred provider option, Choices II. MESSA
officials say that shows that teachers are already doing their part to bring
down health care costs.
In contrast, some public school districts have switched carriers
and used the savings for pay raises. That was the case in Kearsley Community
Schools near Flint, where employees agreed to move from a MESSA product to Blue
Cross Blue Shield’s Flex Blue plan.
Tim Dillon, assistant superintendent, said the district saved 10
percent on health insurance by switching to a high deductible plan, with the
district paying the entire premium and all deductibles.
"It was absolutely amazing," he said. "We took that 10 percent
and it equated to about a 2 percent increase in salary."
Dillon said teachers’ medical privacy is not at risk under
individual district plans.
"I don’t receive any information on anyone’s medical condition
on an individual basis," he said. "It’s not delineated."
Insurance carriers who want to compete with MESSA have the task
of convincing teachers that their plans and services are comparable. The final
decision on health benefits is generally decided at the bargaining table.
"I’m hopeful this law will open them up to everything that’s out
there," Chambers said. "We’re hopeful that this act and a lot of energy around
the act will get our information in front of them."
Miller estimated there are at least half a dozen insurance
carriers who would like to get into Michigan’s school insurance market,
particularly in southeast Michigan.
"This thing will break, but it hasn’t broken yet," he said.