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AUGUSTA — A major tug of war is under way in legislative committee rooms. On one end are some of Maine’s larger towns that believe they can save significant taxpayer dollars by purchasing health insurance for teachers and other school employees directly from insurers.
On the other end is the teachers’ union, the Maine Education Association (MEA), and its MEA Benefits Trust, enjoying a 50-odd-year monopoly in purchasing health insurance for public school employees on behalf of Maine’s towns and cities.
Some background. To help attract teachers and other school employees to membership in the 1950s and ’60s, the union offered a health plan. As more schools were organized, and more participants were added, the union was able to negotiate lower coverage premiums than individual towns or cities negotiating on their own.
The arrangement worked well for the insurance provider, Blue Cross/Blue Shield, later Anthem Blue Cross. In place of several hundred clients scattered throughout the state, there was a single client. And the arrangement worked well for the union, receiving, as a single client, an annual administrative fee or commission for its marketing and negotiating efforts.
In 1993, to defend the union from criticism about possible conflicts of interest, the MEA Benefits Trust was created to operate independently with a director and staff, and nine participant trustees.
Since 1993, the MEA Benefits Trust has accumulated assets of $80.2 million from administrative fees and rebates received from the insurer, and from appreciation and interest earned on assets.
That substantial nest egg also has led to legislative proposals that savings could be made by including Trust participants in the state employees’ plan.
Christine Burke, director of the MEA Benefits Trust, reported in an interview Tuesday that annual premiums to Anthem have grown over the years to nearly $400 million.
In testimony recently, Burke told the Legislature’s Committee on Insurance and Financial Services, “We are Anthem's largest client on the Eastern Seaboard.”
And the Benefits Trust reports in its Internal Revenue Service Form 990, for the fiscal year ending June 30, 2009, that revenue received for the fiscal year included refund settlement fees of $17.7 million and an administrative fee of $2.2 million. Investment income of $2.2 million and a gain of $35,000 on sale of assets brought total revenue received to $22.1 million.
On the expense side, the Trust reported $12 million in benefits paid; salaries, other compensation and employee benefits of $381,000; and other expenses of $1.1 million, for total expenses of $13.4 million. Revenue of $22.1 million, less expenses of $13.4 million, resulted in a single-year gain of $8.7 million for the MEA Benefits Trust.
Burke defends the Trust's $80-million nest egg as an appropriate reserve of 20 percent of annual premiums. “The Trust should be healthy enough to buy down the rates” when appropriate, she said, to level out insurance costs for the school districts.
For example, the nine trustees voted in fiscal year 2008 to contribute $12 million from the Trust to hold premium increases to 2 percent, Burke reported.
Further defending the accumulated balance of $80.2 million, Burke says the assets are used only for the benefit of participants. With its financial clout as Anthem’s largest East Coast account, Burke says the Benefits Trust has held Anthem to a 3-percent profit and 7-percent administrative expenses on its MEA insurance. The arrangement provides that when claims exceed anticipated levels, the Trust shares some of the risk and receives some of the reward when actual costs are lower that anticipated by the actuaries.
Back to the tug of war.
Some Maine school board members are saying that their health insurance rates are too high, even after the Benefits Fund buy-downs. Studies done by Falmouth and Cape Elizabeth suggest that, for those towns alone, switching plans could save $300,000 to $400,000 in premium costs.
There is growing sentiment, both in the larger school districts, and among legislators, that MEA’s virtual monopoly on Maine school health insurance should be broken.
Testimony on two bills, L.D. 404 and LD 619, already has been heard by the Education Committee, chaired by Sen. Brian Langley (R-Hancock County) and Rep. David Richardson (R-Carmel). Work sessions are scheduled tomorrow (Friday), April 15, at the Statehouse.
L.D. 404, sponsored by Rep. Mary Pennell Nelson (D-Falmouth), would allow a school administrative district to request from its insurer loss information on its employees to permit a competitive bidding process for employee health insurance. The MEA Benefits Trust asserts that releasing claims data on a district-by-district basis would ruin their plan.
L.D. 619, sponsored by Sen. Richard W. Rosen (R-Hancock County), would make employees of school administrative units and educational advisory organizations eligible for participation in the state employees’ group health plan.
“Why would we make it a law to prohibit even the consideration of allowing school employees into the State Health Plan, when it could be an option that provides excellent coverage and saves taxpayers money?” Rosen said at the bill hearing before the Education Committee. “How can we defend such a law?”
L.D. 641, sponsored by Rep. Cynthia A. Dill (D-Cape Elizabeth), would remove the waiver of competitive bidding, and require school boards to purchase health insurance for employees through competitive bidding.
The bill would require that insurers’ nonprofit hospitals and medical service and health maintenance organizations provide a school administrative unit with that unit’s own experience rating and claims history.
The bill also would make Maine Municipal Association (MMA) and MEA members eligible to participate in the state employees’ health plan.
Finally, the bill would make employees of school administrative districts and municipalities eligible if their boards or voters so elected.
The Legislature’s Committee on Insurance and Financial Services has heard testimony on L.D. 641, but the work session has yet to be scheduled.
The Maine Education Association’s long and financially beneficial hold on Maine’s school health insurance clearly is facing its most serious challenge since the practice commenced many decades ago.