Thursday, August 6, 2009

A Statewide Health Insurance Plan for Michigan's Public Employees?

Peter Luke’s article “Employee health costs a linchpin for broader Michigan change”, July 19, 2009, focuses on Michigan House of Representatives Speaker Andy

“Dillon's proposal to pull all government employees in Michigan under one health insurance benefit program, and to couple it with a tax overhaul, poses a direct challenge to risk-averse Democrats and Republicans who find it politically safer to defend the respective interests of the status quo.

A single health insurance standard for some 400,000 teachers, emergency responders, caseworkers and engineers save significant sums over time because it assumes employees would shoulder a greater share of their health benefits cost. A 15-percent assessment on a $12,000 policy for a government worker with dependents works out to $1,800 annually.”

Dillon’s announcement picks up the thrust of numerous previous Republican efforts to bring Michigan public employee health benefit costs under control. Coming from a Democrat, especially the Democrat Speaker of the House, controlled by a majority of Democrats, this gives the idea a better chance of being enacted than before. That’s a good thing. The bad thing is that this is still just an idea, with the details to be worked out.

The details will not be simple. Take the situation with public schools. Many public school districts are facing not only single year budget deficits, but chronic multi-year deficits resulting in negative “general fund balances”. Even those districts without budget deficits feel pressed by the current funding situation in Michigan. But the pressures amongst districts are not being felt equally.

Many districts under financial pressures for years have already taken significant steps towards controlling their employees’ health care costs. Some districts have gone from the earlier MESSA SuperCare 1 (a truly Cadillac plan) to MESSA Choices, then Choices 2 (comparable to BCBSM Flexible Blue). Drug co-pays have gone from $2/$2 to $10/$20 (co-pays for generic drugs/brand name drugs). Some districts have negotiated insurance premium “caps” paid by employers, shifting the cost of the premiums in excess of the maximums paid by the employer to the employees. Some districts have adopted high Deductible Plans and Health Savings Accounts, attempting to induce more informed consumerism into health care service purchases to reduce the long-term costs of health care. Other districts have gone to self-insured plans, purchasing a major medical plan to cover the big losses and self-insuring for the deductibles under those high deductible plans – usually for the employees not represented by the Michigan Education Association, the owner of MESSA.

Thus, any savings generated by a new statewide plan will affect different school districts differently. If the state were to simply impose upon school districts a new, lower cost plan, some districts might actually see a cost increase, rather than a cost decrease, while other districts that have not previously negotiated cost savings measure may save money. It would probably turn out that districts which have been most pressed financially in the past are those who have already made these changes and not realize the savings. Hmm, that does not seem to solve their problem.

Nonetheless, to the extent that savings throughout the system may be achieved, Michigan needs to consider new ways of doing business. Michigan is highly likely to lag the nation in economic recovery, so it may be awhile before we are singing, “Happy days are here again…” We must seize upon opportunities to be more frugal, despite the entrenched special interest groups that will oppose changes.



  1. What are your thoughts Rick on those districts who have moved to MESSA Choices and Choices 2, have gone with higher co-pays, increased deductibles, and cut both certified and support staff? Without any current answers to our issues, doesen't it seem there is a structural deficit in Michigan? With a structural deficit in mind, what would be your thoughts as a sustainable long term fix that would benefit all districts across the state of Michigan?

  2. The movement to MESSA Choices adn Choices 2 have been good and necessary cost cutting measures, with little reduction in benefits to the employees.

    Cuts in certified and uncertified staff have been unfortunate steps to balance the budgets. Some can easily be justified, while others cut services to students. Increased class size has been empirically been shown to adversely affect student performance only at the K-2 level, so the negative impact has fallen primarily on additional work for the teachers.

    Some may argue that we have a "structural deficit", but others argue that we simply have a spending problem, which, if unchanged, will automatically cause deficits. The issue then becomes, as usual, do we continue to spend as usual (and fill the gap with higher taxes) or do we address the spending issue?

    With little voter appetite (as well as the negative economic impact of higher taxes), raising taxes does not appear to be the preferred alternative. We need to reduce the costs of public employee and public school employee wages and benefits (with primary focus on the benefit costs that far exceed those of private employees). I see this as the only feasible way to obtain a sustainable balanced budget for the state. This action will likely need to be taken at the state level, as local school boards have been unable to withstand the pressures brought to bear against them (as much as I don't like the loss of local control).

    And, by the way, who are you? I prefer to be corresponding with people who are willing to identify themselves.

  3. As a young educator it is easy for me to say (and I agree) that there needs to be concessions/additional contributions and cost containment in health care in education. On the same hand I also understand the perspective of those who have been in education for a longer duration, thus the hard sell at the bargaining table.

    My perspective comes from my time in a base funded district (Rockford), and my observations of several surrounding districts which receive considerably more per pupil.

    Can a district like Rockford make cuts? The obvious answer is yes, but at the expense of things and people. I do feel that other districts are feeling the distress just like Rockford, regardless of their funding, but I don't think so to the same degree.

    I understand the empirical research with class sizes, but what in your mind would be a suitable class size for secondary education for example? The reason I ask is that if a district such as Rockford were to negotiate teachers paying 25% of their health premiums, this would equate to about 1.5 million dollars in savings. Would this be enough of a reduction from your perspective? In asking this I am not trying to emphasize my point, it is a legitimate question and I would honestly like your perspective.

    Overall, I don't feel that our school district has a spending problem, the problems that exist is out of individual school districts control. In stating that Rockford is a base funded district, my intent is not to use that as an excuse for any reason. We have been and will continue to be a successful district and community, as are many districts around the state. I do appreciate your feedback.

  4. I agree that health care costs are a large part of the education budget, but who is at fault here? I think a federal audit of health care companies should be the starting point.

    Do school districts need good health care, being exposed to thousands of students 5 days a week? I think so, but the Health Insurance companies are charging far too much for the mass fear of illness.

    A reform of the Health Care companies should be sought for all of Michigan citizens. We would see that businesses would be invigorated by not having to pay so much to them. We would see that school districts would be able to spend more on the education of students than health care. Legislatures would not be wooed by campaign money of the health care companies. The same goes for the drug manufacturers. When you can buy a television for less than a months worth of medication, there is something wrong.

    Don't forget that all humans get ill at sometime or another and low cost health insurance should be all that we need to insure healthy citizens.