By Steve GunnEAG Communications
MUSKEGON, Mich. – One of the Education Action Group’s founding missions was to help uncover and expose the inconvenient truth behind the Michigan Education Special Services Association (MESSA).
MESSA is owned and operated by the Michigan Education Association, the state’s largest teachers union, and for decades has used the union’s strength at the bargaining table to force school boards into purchasing its highly expensive health insurance coverage for employees.
In most Michigan school districts, teachers and other employees paid little to nothing for MESSA’s “Cadillac” insurance plans, but the exorbitant premiums were draining district coffers at an alarming rate. Union officials would typically refuse to consider less expensive insurance carriers, or increases to employee contributions, during contract negotiations.
MESSA, meanwhile, raked in massive profits and transferred millions to the MEA each year in the form of “marketing fees.”
The situation gave MESSA a grotesquely unfair advantage in the public school insurance market, and taxpayers paid dearly. For years, the racket went relatively unnoticed by the public.
As the recession hit Michigan, EAG and other taxpayer advocates, like the Mackinac Center for Public Policy, highlighted the massive savings districts could realize by switching away from MESSA to less expensive insurance companies.
A few school districts managed to break away from MESSA and saved millions, but the vast majority continued to meet fierce resistance from union officials – which left school officials with few options but to lay off younger teachers or cut student programs to maintain the expensive coverage.
But oh, how times have changed.
A new law approved by the Republican legislature and signed by Michigan Gov. Rick Snyder is finally forcing school employees who insist on expensive health insurance to pay a portion of the cost themselves.
That, in turn, is creating more competition in the school insurance market, and forcing MESSA to offer more affordable insurance options.
“The rules have changed,” Dusty Fairfield, president of the Ravenna (school district) Education Association, told the Mackinac Center. “Your local districts were paying for the good insurance and it never got inside the teachers’ wallets. Now, all of a sudden when it is coming out of your own pocket, finances are a real burden for educators.
“It is forcing them to say, ‘Hey wait a minute. I can’t afford a Cadillac plan.’ So we shopped around.”
The changes capped what public employers can legally pay for health insurance premiums at $5,500 for a single plan, $11,000 for two people, and $15,000 for a family, or up to 80 percent of the cost. Data from the Mackinac Center shows that MESSA’s 2011 premiums for school districts averaged $7,210 for a single plan, $16,173 for two, and $17,692 for family coverage.
Some districts switched away from MESSA before the new rules went into effect, while others made changes because of the legislation, but the result is the same.
Michigan school districts are now saving millions on employee health insurance, because state government finally found the courage to confront the union and do something about the MEA/MESSA scam.
The savings
Each year, Michigan taxpayers spend $2 billion to provide health insurance for public school employees. About 80 percent of Michigan school districts have been contracting with MESSA, which repackages insurance from Blue Cross/Blue Shield and resells it to schools at an inflated rate.
The extra layer of administration, combined with the lack of competition from other insurance carriers, has forced many school districts to pay double-digit insurance rate increases in recent years. Those increases put a heavy burden on already overloaded school budgets.
The good news is that those districts reaped massive savings when they finally switched to less expensive carriers, or turned the extra costs over to employees. Michigan House Speaker Jase Bolger explained to the Kalamazoo Gazette that the savings are generally playing out in one of two ways.
“Some schools have chosen to bid their health insurance and found the necessary savings by changing carriers and therefore not passed on increases to teachers,” Bolger said. “In the overwhelming number of cases where teachers have seen a significant increase in (employees’) costs it has been because they’ve chosen to stay with their MEA-associated MESSA plan, which is their choice to make.”
Teachers in the Dearborn Heights district chose to keep MESSA, and pay up to 37 percent of the premium, saving the district $750,000.
In most districts, the savings came from changing to a new insurance carrier.
The Otsego district last fall saved $500,000 ($4,200 per insured employee) by switching from MESSA to a comparable plan offered by Priority Health, according to the Kalamazoo Gazette.
Beaverton Rural Schools dropped MESSA and saved $300,000 per year. Ovid-Elsie Area Schools saved $338,000. Whittemore-Prescott Area Schools reduced insurance costs by $330,000. Laingsburg Community School District saved $211,000, and North Branch Area Schools saved $200,000.
And the list goes on and on.
The exodus of schools from MESSA’s fold is also forcing the insurance giant to react to the market, and introduce new, lower cost options for school employees.
“MESSA’s three new HSA-qualified plans are designed to give our members more high-quality options to reduce the cost of their coverage while protecting the financial security and peace of mind they value highly,” Gary Fralick, MESSA’s communications director, told the Mackinac Center.
In other words, the exposure of MESSA’s insurance racket and implementation of new state laws means the company must now compete for clients. And that competition will ensure that more tax dollars are devoted to improving instruction for Michigan’s public school students.
It’s about time.
