Things are about to get a lot tougher for the 440 or so Michigan school districts that buy employee health insurance from the Michigan Education Special Services Association. MESSA recently reported that it's predicting a statewide average increase of 13 percent in the price of its premiums.
The timing of this cost hike could hardly be worse. Enrollment is at a 20-year low, tax revenues aren't likely to rebound, the federal stimulus well has nearly run dry, cost-savings proposals don't seem to be going anywhere in the Legislature and district contributions to the state-run school employee pension system will rise by 4 percent. Worst of all, since these MESSA insurance costs are locked into labor contracts, schools have no real way of avoiding them unless their local union agrees to earnestly renegotiate.
These increased insurance costs will lead to more teachers being laid off. Based on the most recent data about school employee compensation from 2008, Michigan spent the equivalent of $83,860 per instructional employee. According to the most recent financial audit from MESSA, their premiums cost schools a total of $1.164 billion in 2009, meaning that a 13 percent increase to these costs will translate to schools needing an extra $151 million to pay for MESSA insurance. This means that in order to keep the exact same MESSA insurance coverage, schools would need to cut the number of instructional employees by 1,800, or enact some other equivalent cost-saving maneuvers.
Districts, and more importantly their employee unions, should ask themselves if their MESSA insurance is really worth this cost.