Font size:
In more than 300 of Michigan's 524 K-12 public school districts, health insurance for teachers and other school employees is administered by an organization whose costs are excessive and whose practices are secretive, coercive, and monopolistic. The result is scandalous public policy that obstructs the education of children and corrupts the political process.
That organization is the Michigan Education Special Services Association, better known as MESSA. It is a wholly-owned subsidiary of the Michigan Education Association (MEA)--the 127,000-member teachers' union and one of the most powerful lobbies in Lansing. The MEA pressures school districts to buy MESSA insurance; MESSA then pays the MEA for its "marketing" services, retains an unusually high administrative fee for itself from the premiums the schools have paid, and then turns the remaining funds over to the actual insurance underwriter, Blue Cross/Blue Shield of Michigan.
The secrecy which shrouds exactly how the public's school tax dollars are being used by MESSA is a byproduct of the MEA's political clout. As a heavyweight donor to legislative candidates and incumbents, it lobbies successfully against competitive bidding for teacher health insurance. It often threatens illegal strikes if school districts try to shop elsewhere for similar services.
Referring to the more than $300 million in health care premiums MESSA secures from taxpayers, the state attorney general's office stated recently that "It is certainly in the public interest that a little sunshine be allowed to illuminate the handling of that money." The Insurance Bureau has completed an audit of MESSA operations, but the public's right to know has been suppressed for weeks by a gag order. The MEA convinced Ingham County Circuit Court Judge James R. Giddings to prevent the Insurance Bureau's findings from becoming known.
An exhaustive 64-page report from The Mackinac Center for Public Policy identified several problems with MESSA that sooner or later must be dealt with by legislators and the Michigan general public. For example:
MESSA's lavishly generous benefit plans, which cover most health-related expenses in full, are a major factor in soaring health care costs. The House Fiscal Agency reports that health insurance expenditures for state employees (whose benefits generally exceed those of their private sector counterparts) rose 269 percent in the 1980s, but health insurance costs for Michigan public school employees rose an astounding 801 percent.
With almost no deductibles or co-pays, and with minimal use of proven "managed care" cost-saving measures, MESSA insurance is choking funds from schools that might otherwise be spent for actual education. What's worse, MESSA sometimes changes health benefits without the consent of school districts who pay the bill, and steadfastly refuses to provide districts with claims information that would permit cost comparisons and competitive bidding with private sector firms.
MESSA's administrative expenses are at least 13 percent of annual premiums, far higher than the typical 4 to 5 percent incurred by other third party insurance administrators. MESSA then pays millions of dollars--$8.2 million in 1992--for data processing and other services to another MEA subsidiary, the for-profit Michigan Education Data Network Association, or MEDNA.
The payments to MEDNA support vast computer resources and other services that provide the MEA with much of its organizational power and political muscle.
The relationship between MESSA and its underwriter, Blue Cross, raises legitimate questions about anti-competitive practices. Blue Cross competes with MESSA, and serves as its underwriter at the same time. This unusual situation has caused some school district officials and MESSA competitors to call attention to the underwriter's preferential treatment of MESSA. That, plus the fact that the President of the MESSA Board of Trustees also serves on the Board of Directors of Blue Cross, would suggest strongly that MESSA's claim that it truly competes with Blue Cross to administer health benefits is a hollow if not deceptive one.
Surely, enough is at stake here to warrant a frank public discussion about MESSA and full disclosure of its financial and political dealings. A policy option that offers the best chance for beneficial change is one that exempts insurance and benefits from mandatory collective bargaining. School districts would then have the freedom to select insurance providers based on cost and merit, not political pressure. If MESSA is indeed the most efficient administrator of teacher health insurance, it doesn't need secrecy and MEA pressure to sell its product.
Does MESSA operate in the best interests of the general public of Michigan? That's a question that cries out for public attention and one which so far, the MEA seems determined to squelch.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through our research and education programs, we challenge government overreach and advocate for a free-market approach to public policy that frees people to realize their potential and dreams.
Please consider contributing to our work to advance a freer and more prosperous state.
