Rising health insurance costs have squeezed school
budgets considerably in recent years. According to statistics from the Center
for Educational Performance and Information, these costs have grown in
per-pupil terms by 31 percent since 2004. Michigan taxpayers now contribute
over $2 billion annually, or about $1,300 per student, to provide health
insurance for public school employees.
Factors contributing to these rising costs are
many, but two stand out. First, most districts (about 80 percent) purchase
health insurance plans from the Michigan Education Special Services
Association, a third-party administrator
affiliated with the state’s largest government employee union — the
Michigan Education Association. Secondly, school employees, especially
teachers, have for many years contributed far less towards the cost of their
own health insurance premiums than the average private-sector employee.
These health insurance savings should be funneled back into student programs and services. This will be especially helpful for districts that have been cutting programs in order to meet rising labor costs.
Mackinac Center research found that the average
MESSA premiums used by districts in 2011 were $7,210 for single, $16,173 for
two-person and $17,692 for family plans. These are substantially more expensive
than Michigan’s private-sector averages: According to data from the Kaiser
Family Foundation, MESSA premiums are 52 percent (single), 64 percent
(two-person), and 36 percent (family) more expensive than Michigan’s
Recently approved legislation limits the amount
districts can spend on health insurance to $5,500 for single plans, $11,000 for
two-person and $15,000 for family plans. If districts purchase more expensive
plans, school employees will have to pay the difference. Considering MESSA’s
average costs, this will assuredly save districts (and taxpayers) millions of
Districts may choose to spend beyond these, but
only if school employees pick up at least 20 percent of the premium. But even
these districts will likely save overall, since most teachers have historically
contributed very little — or nothing — to the cost of health insurance
By limiting school health insurance expenditures,
Michigan’s Legislature made significant strides on two important fronts:
Devoting more resources to student learning and leveling the disparities
between private- and government-sector benefits. This reform was sorely needed,
and is already paying large dividends for schools, students and taxpayers.
A 2009 Mackinac Center survey of districts found
that teachers contributed on average only 4 percent to the cost of a family
health insurance premium, and in more than 300 districts teachers paid nothing.
The average for a private-sector employee in Michigan is 22 percent.
This new legislation is spinning off other positive
effects. Some districts are starting to draw hard lines at the bargaining table
for the benefit of taxpayers. For instance, the Dearborn Heights district went
from fully subsidizing teacher health insurance to offering teachers two
options: pay 20 percent of the premium for a less expensive health insurance
plan or pay between 32.5 and 37.5 percent for high-priced MESSA insurance. The
district saved $750,000.
MESSA also appears to be responding to the
changes. It will start offering consumer-drive, high-deductible health
insurance plans paired with health savings accounts — a price-effective
innovation the Mackinac Center has promoted for years. Perhaps MESSA is
recognizing that using the MEA’s negotiating power to sell their high-priced
plans might not work anymore now that hard caps are in place.
These health insurance savings should be funneled
back into student programs and services. This will be especially helpful for
districts that have been cutting programs in order to meet rising labor costs.
Taxpayers should expect to see schools starting to expand the services and
opportunities offered to students.
Of course, there is a very real concern that other
rising costs in school budgets will nullify these savings. The state-run school
employee pension program, for example, is growing to be a huge financial burden
for districts. The state Legislature should get these costs under control and
reduce schools’ long-term financial obligations.
To be sure, school districts still face many
severe fiscal challenges, but recent actions by the Legislature alleviate the
rising health insurance costs that had burdened districts for years.
Michael Van Beek is director of education
policy and Kyle Jackson is an education policy analyst at the Mackinac Center
for Public Policy, a research and educational institute headquartered in
Midland. Mich. Permission to reprint in whole or in part is hereby
granted, provided that the authors and the Center are properly cited.