Mich. Union's Insurance Subsidiary Under Fire
A subsidiary of the Michigan Education Association that administers health-insurance benefits for public school employees is coming under increasing fire for practices that its critics charge are wasting tax money.
The not-for-profit company, the Michigan Education Special Services Association, manages contracts for insurance benefits in 60 percent of the state's school districts. MESSA puts together the insurance packages, which are then underwritten by Blue Cross/Blue Shield of Michigan.
The benefits, according to a report released last month by the Mackinac Center for Public Policy, are "lavishly generous'' and are driving up health-insurance costs for public school employees.
The report and critics of MESSA in the legislature complain that the company enjoys an unfair advantage because affiliates of the state teachers' union press during contract talks to have MESSA administer their benefits.
Under Michigan law, both the amount of insurance to be provided to employees and the company that will administer the benefits are subjects of collective bargaining.
"MESSA is, in effect, an insurance company that uses mandatory-collective-bargaining laws to sit across the negotiating table and pressure school districts to purchase its coverage,'' charges the report by the Midland, Mich.-based think tank.
A subcommittee of the Senate commerce committee is currently holding hearings on MESSA and is considering a bill that would require districts to subject health insurance policies to competitive bidding.
A related measure would require third-party administrators, such as MESSA, to give districts information about their loss histories so that competing companies could estimate the cost of covering the districts' employees.
Currently, MESSA does not share such information with school districts.
"The taxpayers are getting ripped off in this system,'' said Sen. John Welborn, a Kalamazoo Republican who is one of MESSA's most vocal critics.
Gov. John Engler also has called for competitive bidding for public school employees' health insurance.
In addition, the state Insurance Bureau recently completed an audit of MESSA, the findings from which were sealed by a circuit-court judge at the request of the M.E.A.
Warren Culver, the executive director of MESSA, said the company administers "the best health-insurance program in the state of Michigan.''
Mr. Culver disputed the charge that the program is excessively expensive, arguing that competitive bidding would ultimately drive up, rather than reduce, the cost of health insurance.
He also called the Mackinac Center a partisan organization linked to the Republican Party. Legislative critics of MESSA, he said, are using the issue to get at the powerful M.E.A.
"We're caught in a battle between people who don't believe in unions and a big union,'' he contended.
Linked to Computer Firm
The Mackinac Center report says MESSA covers 80,000 public school employees and 200,000 dependents, with annual premiums of about $360 million.
The report says the teachers' union requires its bargaining agents to press for MESSA coverage during contract bargaining. UniServ representatives, who help locals negotiate contracts, "market'' the MESSA packages, the report says, for which the company pays the parent union a fee.
MESSA also purchases data processing and other services from a for-profit subsidiary of the union, the Michigan Education Data Network Association, or MEDNA.
The report questions whether it is necessary for MESSA to purchase these services, or whether it is "using the money that it collects from school districts to help enrich the computer and other resources of the whole M.E.A. conglomerate.''
Senator Welborn also is questioning whether MESSA is providing money that the M.E.A. is using for lobbying work.
Mr. Culver said it is "flat wrong'' to assert that MESSA is used to funnel money to the parent union. Only funds donated to the union's political-action committee are used in that manner, he said.
"The laws in this state just don't allow that,'' Mr. Culver said.
Lavish Benefits Seen
The 64-page report also questions whether the benefit packages administered by MESSA are too lavish. They typically cover most health-related expenses in full, including human-organ transplants, with no deductible or co-payments, the report says.
The coverage costs $1,000 more per person than Michigan's state-employee health insurance, it adds.
In addition, MESSA's administrative costs are "far higher'' than other third-party administrators' costs, the report says.
Between 1981 and 1991, it says, health-insurance costs for public school employees in Michigan rose 801 percent, compared with 269 percent for state employees' health insurance.
Mr. Culver said that while MESSA benefits are not cheap, they are less expensive than those offered by Blue Cross, which competes with MESSA to sell plans directly to districts.
In response to the criticisms, MESSA has hired the accounting firm of Peat Marwick to examine its practices, the executive director said.
The report will show, Mr. Culver predicted, that MESSA's administrative costs are lower than those of similar organizations or insurance companies.
Vol. 13, Issue 17