GOP Targets School Health Benefits

February 14, 2005
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LANSING — Seeking to help school districts contain rising costs, and in the process setting up a contentious political issue leading up to the 2006 campaign, Republican lawmakers are targeting a major restructuring in how public school employees receive health benefits.

Among the potential options the GOP-controlled Legislature will consider in the present legislative session is bringing teachers and support staff into the state’s employee health plan or creating an entirely new insurance pool specifically for public school employees.

Arguing that the rising cost of health coverage has become too large of a financial burden for school districts, lawmakers have commissioned a study to define the scope of the issue and offer possible remedies.

“It’s going to be an issue that is not going to go away and it’s only going to get worse,” said Ari Adler, press secretary for Senate Majority Leader Ken Sikkema, R-Wyoming.

“We just can’t keep pouring money into a broken system. Any time we spend more money on schools, we are propping up an expensive health insurance system instead of getting money into the classroom,” Adler said.

Sikkema is co-sponsor with Sen. Shirley Johnson, R-Troy, of two bills introduced late last month in the Legislature that would create a state-administered medical plan for public school and community college employees.

Both bills were left largely unwritten and will sit idle until the $250,000 study the Legislature commissioned is completed later this year. Lawmakers will re-write the bills and push forward once the results of the study come back.

The legislative move is in response to what some lawmakers say is too large a share of the per-pupil state grant to schools that now goes to pay for employee health benefits.

The Grand Rapids Public Schools, for instance, spends 11.6 percent, or $1,153, of the $6,700 base per-pupil grant on health coverage, up from 11.3 percent the prior fiscal year. That’s projected to rise to 12.7 percent in the 2006 school year.

State Rep. Jerry Kooiman, R-Grand Rapids, claims the costs of providing both health coverage and pension benefits are the two issues driving a crisis in funding for public education.

“The question comes down to dollars for the classroom to help improve education for our kids, or are we intent on continuing the status quo?” Kooiman said. “That’s the decision the Legislature is going to have to make and the governor is going to have to make.”

Combined, health-care and pension costs now eat up about $2,000 of the per-pupil grant for school districts and are growing by double-digit rates annually — a rate that school districts simply cannot sustain, said Don Wotruba, director of legislative affairs for the Michigan Association of School Boards.

The issue will likely generate plenty of angst in Lansing as the 2006 gubernatorial campaign gets close.

Already the Michigan Education Association, which represents 157,000 teachers, support staff and administrators in school districts throughout the state, is gearing up for the coming battle.

About 60,000 MEA members get their health coverage through the union-affiliated, non-for-profit Michigan Education Special Services Association.

In a legislative update on its Web site (www.mea.org,) the MEA calls the push a “plot to take over school employee health care” and “gut” collective bargaining, and contends that lawmakers want to “raid school employees’ health-care benefits so they can spend the savings elsewhere to help solve the state’s budget deficit this year.”

MEA Communications Director Margaret Trimer-Hartley said she finds it ironic that the GOP legislative caucus, as it pushes hard for reductions in state spending, would even consider having the state assume public school employee health coverage.

“We’re actually shocked that in an era where so many are calling for smaller government, such a package of bills would be presented that would actually bloat the state bureaucracy,” Trimer-Hartley said. “Simply moving this group of employees to a different pool does not impact the real reason health-care costs are going through the roof.”

The union also takes exception to the notion that the cost of providing health coverage for teachers and other school employees is deferring financial resources from the classroom.

“If the teacher in the classroom is not the single most important expenditure, then what is?” Trimer-Hartley said. “They are the greatest classroom resource.”

In recent contract settlements with school districts, the MEA has given ground to address rising health coverage costs, accepting higher out-of-pocket costs through higher co-pays and deductibles or taking smaller annual salary increases in order to maintain benefit levels, she said.

In Holland, the local education association and the Holland Board of Education this month reached agreement on a new contract for the past and present school years that raises prescription co-pays from $2 to $10, and from $2 to $5 for generic medications, and increases deductibles from $50 to $100 for individuals and $100 to $200 for families.

The changes will save the district about $90,000, or $35 to $40 per employee, per month, for the remainder of the 2004-05 school year, Assistant Superintendent Jim Sullivan said. The Holland Public Schools presently spends $1,150 per person, per month for employee health coverage.

The Holland contract also freezes the current pay scale.

MESSA has recently rolled out a managed-care plan in some school districts that is designed to contain costs. Launched last year, the Choices 2 PPO plan costs 7 percent to 10 percent less than MESSA’s traditional plan, MESSA Communications Manager Gary Fralic said.

Like commercial carriers and managed-care companies, MESSA also is pushing more into disease management, prevention and wellness to contain health-care costs, Fralic said.

“MESSA is very aware of the health cost spiral that’s really a national problem,” he said. “We are pursuing what we believe are smart strategies for holding down health-care costs long term.”

School boards are free to seek another insurance carrier for health coverage when contracts come up for re-negotiation, Trimer-Hartley said, although MEA members prefer MESSA, bargain hard to maintain the plan and have been willing to give ground in other areas such as salaries.

Lawmakers dispute the contention that health coverage for school employees is competitive, saying the inability to secure claims data from MESSA prevents school districts from competitively bidding out health coverage with any accuracy.

Fralic counters that school districts can bid out coverage and have an employee group rated based on demographics. Releasing data on an employee group’s claims experience could generate adverse selection, or “cherry-picking,” Fralic said.

Some parties in the debate say the higher co-pays instituted with recent contracts remain minimal and that even with the changes, school employees enjoy a rich benefit package compared to the cost-shifting occurring.

To the MEA, the debate is symptomatic of a broader problem. Rather than pushing to restructure employee health benefits, legislators need to solve the state’s fiscal crisis and properly fund education, Trimer-Hartley argues.

“We believe the Legislature has shirked its responsibility in coming up with a long-term solution to school funding.”

In searching for potential cost-saving alternatives, GOP lawmakers are not seeking to cut or diminish health benefits, Adler said. If MESSA insurance turns out to be the most cost-effective coverage, that’s fine, he and others say.

The issue comes down to looking at how funds earmarked for public education are spent, rather than continually examining the funding mechanism and how much money is needed, Adler said.

“We are not trying to suggest school employees and teachers should not have good health insurance. Good health benefits will attract good teachers to come to Michigan and to stay in Michigan, but we have both a fundamental and a structural issue to address,” he said. “It’s high time we look at the spending side of the equation when it comes to school funding. The common theme has been to look at how much more money we can put into the schools.”

In commissioning a study on the issue, lawmakers want to know whether a statewide insurance pool for school employees could generate cost savings through more efficient administration and the large buying power of the collective group.

Brett Jackson, a legislative aide to Sen. Johnson, said the administration cost of the state employees health plan is about 5 percent, a low percentage for any health plan.

By bringing school employees into the state plan or creating a new state-administered pool, “we think we can save money by economies of scale,” Jackson said.

While the Association of School Boards in Lansing has not taken a position on the potential creation of a statewide insurance pool, the introduction in January of Sikkema and Johnson’s bills are certainly welcome, although any change would have to maintain a degree of local control.

“If nothing else, these bills start a discussion that is much needed,” MASB’s Wotruba said. “We think something has to happen.”    

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