One reason why Wisconsin needed union reform: captive benefits

The standoff in Wisconsin will stretch into its third week, and the fleebaggers in the state Senate still refuse to return to vote on the bill passed in the Assembly on Friday morning.  Legislators say they will remain out of state as long as the bill is on the table, and demand that Governor Scott Walker pull it back.  Walker, for his part, has refused to do so, and will have to announce layoffs during Tuesday’s budget address if the budget-repair bill remains stalled in the legislature.

Some have called for Walker to reconsider his push to remove pensions and benefits from collective bargaining with public-employee unions as a compromise, but Gary Gross recalls a Patrick McIlheran column from December that explains exactly why Wisconsin needs to push for PEU reform now.   The MSJ columnist wrote about the big stake that the Wisconsin Education Association has in forcing individual school districts to negotiate benefits — because they can demand that their own WEA Trust have a monopoly on health insurance:

Districts that buy WEA Trust plans average $1,665 a month for family premiums, according to their state association, while those choosing other carriers average $1,466. The difference is greatest where taxpayers cover the whole premium.

Milton was paying $48,301 more in premiums for every month that it couldn’t switch from WEA Trust to a pair of plans from Madison-based Dean Health and Janesville-based MercyCare that it said were comparable. The district already had switched its administrative staff, said Nikolay, and while the union objected that the new plans would restrict choices, most teachers already used doctors at Dean or MercyCare clinics, Nikolay noted. “That made it less problematic for a lot of our families.”

And it saved a bundle for a district saddled with “bleak local economic conditions,” as its arbitration case put it. It is losing students and, thus, state aid. The area is losing population. The district needed to control premiums, and the arbitrator agreed.

The question is why it had to go to arbitration at all. The answer is that in Wisconsin, school districts can’t change health carriers – even if they keep benefits the same – without negotiating. And teachers unions have been very partial to keeping WEA Trust.

This may be changing. If unions won’t agree to dump WEA Trust plans, a district could always get an arbitrator to side with them. But districts were loath to use arbitration, which they could lose badly, so long as they had the old qualified economic offer law in place.

That guarantee of no arbitration in exchange for a certain compensation hike got killed, however, by Democrats last year.

When Walker says that the PEU reforms will allow counties, cities, and school districts more latitude in budget cuts, this is what he means.  The protesters in Madison have avoided this particular point, perhaps because it exposes one of the real stakes in the fight.  The WEA, perhaps the most powerful union in the state, makes a fortune off of selling its insurance at inflated prices to districts around the state.  Milton, for instance, saved $382 per month per employee when it got an arbitrator to agree to end the WEA Trust concession.  Spread that around to the thousands of teachers in Wisconsin, and taxpayers can get a pretty good idea what PEU reform might mean in reducing stressed budgets at every level of government in Wisconsin.

The Wall Street Journal noticed this yesterday as well:

Under the current collective- bargaining agreements, the school district pays the entire premium for medical and vision benefits, and over half the cost of dental coverage. These plans are extremely expensive.

This is partly because of Wisconsin’s unique arrangement under which the teachers union is the sponsor of the group health-insurance plans. Not surprisingly, benefits are generous. The district’s contributions for health insurance of active employees total 38.8% of wages. For private-sector workers nationwide, the average is 10.7%.

No doubt the WEA gets a good deal for its members, but it’s getting a better deal for itself.

Gary says this heretofore overlooked context explains why unions are bitterly opposing the changes, and why they are so important to defend:

That the union opposed the switch from WEA Trust to a more taxpayer-friendly insurance plan says everything about the teachers union’s priorities. That $1,000,000 in savings could’ve gone towards hiring more teachers to lower class sizes. It could’ve been used to get better equipment in science labs. It could’ve just been saved. It could’ve been used for a combination of those options.

This isn’t a tiny consideration. It’s gigantic in impact.

The refusal to collect union dues probably fuels the union opposition most, as it will strangle their political operation in Wisconsin.  But for the WEA in particular, the loss of their near-monopoly on health insurance in the public sector will do the next-highest level of damage to union finances.  Just remember that when people tell you that the cause for which they’re fighting isn’t about money, it usually is.

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