The third-party administrator that sells health care benefits to a majority of Michigan school districts reported net assets of nearly $270 million as of June 30, 2006, including an increase in assets of approximately $129 million in the 2005-2006 fiscal year. That compares to net assets of $119 million and an $88 million net increase the previous year. The Michigan Education Special Services Association said in its annual report that those numbers reflect its overall operation, including all medical, vision, life and disability coverage.

In its medical plan alone, MESSA reported that it collected approximately $1.19 billion in premiums, while the cost of medical benefits amounted to approximately $1 billion. Adding in administrative and other expenses, the total expense for the medical plan was $1.13 billion, the report says, giving the association an approximately $65 million gain in the medical plan. This was the second consecutive year the organization reported a net gain.

MESSA is a third-party administrator established by and affiliated with the Michigan Education Association, a school employees union. It purchases insurance plans from Blue Cross Blue Shield of Michigan and then resells those packages to school districts. While the amount the association collected in premiums was about 5.4 percent more than the total expense of the medical plan, the gain is not called "profit" by MESSA, a not-for-profit Voluntary Employees’ Benefit Association.

The gain MESSA realized will be held by Blue Cross Blue Shield of Michigan in what is called a rate stabilization reserve, the report said. According to the report, the gain is credited back to the plan over future years, as is the interest earned on premiums paid in advance and any cost savings from incentive programs. The reserve stood at $79 million as of June 30, 2006.

"This improved financial picture is welcome news as it will help MESSA to moderate rates in the upcoming 2007-2008 renewal," the report states. Gary Fralick, MESSA director of communications and government relations, declined to discuss the report with Michigan Education Report. A Michigan legislator called the gains "a bit outrageous" in the face of financial pressure on public schools.

"I think they’re uncalled for … particularly since school districts are being bombarded by financial issues," Rep. Brian Palmer, R-Romeo, told Michigan Education Report. "Every new dollar we give them (school districts) is going into the black hole of retirement and health care. … It doesn’t help education."

The $65 million net gain reported by MESSA would equal about $41 for every student enrolled in a conventional public school district in Michigan, based on state data putting the number of full-time equivalent students in those districts at approximately 1.58 million as of March.

Former chairman of the House Education Committee, Palmer has tried unsuccessfully in past years to push through legislation that would require insurance administrators like MESSA to release aggregate claims data on individual school districts. Supporters said such laws would allow other insurance companies to make competitive bids and bring overall health benefit costs down. But MESSA has said that the move could allow companies to "cherry-pick" only low-cost districts, leaving the rest to pay higher premiums.

MESSA has announced an average increase of under 3 percent in next year’s rates.

In her written introduction to the report, Executive Director Cynthia Irwin said MESSA raised rates by a smaller amount than expected in 2005-2006 because of slower growth in medical costs and a dramatic shift away from MESSA’s most expensive coverage plan to its less costly preferred provider options. Enrollment in the preferred provider plans increased by 620 percent in two years, the report noted. About 60 percent of MESSA members are now in PPO plans, up from 6 percent two years ago. In contrast, membership in the more expensive traditional plan, called Super Care, fell by more than half.

Most of that shift played out at bargaining tables across Michigan, as local school employee unions and school districts engaged in heated debates over employee health benefits in general and the cost of MESSA packages in particular. In addition to shifting to MESSA PPO plans, many districts and teachers settled contracts that save money by requiring teachers to pay more out of pocket for prescription drugs and giving them a financial incentive to buy generic drugs. Other districts have agreed to contracts in which teachers pay part of their own health care premium or in which teachers agree to lower pay raises in exchange for maintaining MESSA coverage. Some districts have chosen a different insurance provider altogether, and a group of districts in West Michigan have jointly formed a self-insurance pool.

In Bay City Public Schools, for example, the district switched carriers from MESSA directly to Blue Cross Blue Shield for its administrators and support personnel, while teachers shifted to the preferred provider plan. Early estimates were that the district would save $2 million as a result.

"It’s like trying to move a mountain to move teachers to another health care plan," Glen Baracy, superintendent for Wayne-Westland Schools, told the Detroit Free Press in a March article. MESSA insures 900 teachers in the district.

Baracy said Wayne-Westland saved 14 percent on health insurance for administrators and office staff by switching to the School Employees Trust and School Employers Group, which also uses Blue Cross benefits plans.

"It’s their way or the highway," Palmer said of MESSA. "They only want their own system in there. That, to me, does not bode well for saying, ‘We are all for helping kids.’"

The number of people enrolled in the MESSA medical plan increased during the years 2002 to 2004, but has declined each year since. There were approximately 88,000 people enrolled as of July 2006, down from approximately 96,000 and 100,500 in 2005 and 2004, respectively. When enrollees’ dependents are included, the total number of individuals covered through MESSA medical programs in the past year averaged 260,000.

MESSA’s annual report also noted that during the 2005-2006 reporting year:

– About 54 percent of MESSA payments were spent on outpatient services, with another 27 percent on prescription drugs.

– Pregnancy and/or childbirth accounted for 25 percent of all inpatient services, totaling $26 million, at an average cost of $6,400.

– Approximately 3.1 million medical prescriptions were filled statewide, down from 3.2 million the previous year. MESSA paid out more for Lipitor, a brand name drug used to treat high cholesterol, than for any other medication, totaling $10.1 million.