Court upholds law to break school union’s “virtual monopoly” on health insurance

The Maine Education Association’s longtime monopoly on health insurance for Maine public school employees has been broken, opening the door for school districts to seek lower-cost health insurance plans—and reduce local property taxes.

According to the most recent data, the Maine Education Association Benefits Trust paid Anthem an annual premium of $370 million and kept $87 million in a reserve fund, plus paid Anthem $900,000 a year to administer the plan. The MEA Benefits Trust has maintained a stranglehold on health insurance costs by refusing to share insurance data with school districts so they can shop for their own, lower-cost insurance.

To remedy this, the legislature enacted L.D. 1326, “An Act To Allow School Administrative Units To Seek Less Expensive Health Insurance Alternatives,” which requires that health insurers must disclose to school districts their insurance claims history, called the “aggregate loss information.” The loss information could then be provided to health-insurance companies in an attempt to compare plans and costs—a commonly used practice in Maine.

Since health insurance for school workers costs up to 15% of total education expenses, spending less on health insurance plans will mean direct savings to taxpayers.

But the Maine Education Association Benefits Trust (MEABT), which manages a statewide health insurance plan for most of Maine’s public school work force, claimed that its loss information is “a confidential trade secret.” In October 2011, the MEABT sued the State of Maine, seeking an injunction against L.D. 1326.

The purpose of L.D. 1326, which was sponsored by Rep. Ralph Sarty (R-Denmark), was to make the loss information available so school districts could explore lower-cost options for health insurance plans. Critics of the Anthem monopoly with MEABT have said that using lower-cost plans could save school districts money.

After the Maine Education Association sued to stop the law, a district judge denied the injunction. That court’s decision was upheld on September 24 by the U.S. 1st Circuit Court of Appeals. The Appeals Court found that the MEABT had created “a virtual monopoly.” The MEA has now dropped the suit.

“Because of a new law passed by the state legislature, local school districts across Maine are now able to seek competitive bids in providing health insurance for teachers, staff and their families,” said Maine State Treasurer Bruce Poliquin. “Industry professionals estimate possible savings of up to 15% for the second most expensive item in school budgets behind salaries: health insurance for school employees. Expected substantial savings could be used to reduce rising local property taxes.”

An estimated $400 million a year is paid by local taxpayers to buy health insurance for Maine public school teachers, staff and their families. “This cost has contributed to escalating property taxes during the past two decades,” Poliquin said.

For example, the RSU 18 school budget (Belgrade, China, Oakland, Sidney and Rome) is $32 million for 2013. Approximately $4.8 million is directed to pay for employee health insurance.

“Inviting insurance companies to compete for this business might save Belgrade, China, Oakland, Sidney and Rome taxpayers nearly $720,000 per year,” Poliquin said. “That’s real money that could be used to lower smothering property taxes.”

“School systems can now generate savings from their health insurance programs to reinvest in the classroom instead of wasting time and money fighting frivolous lawsuits,” said Governor LePage. “Last year, I challenged the MEA to increase their professional development spending by offering to match any increase in funding. That challenge remains unanswered. Perhaps now the MEA can refocus its attention on teachers.”

More than 70 schools have asked for the claims loss data from their insurance provider; which would allow the schools to shop around for lower-cost healthcare coverage. Anthem, which is the insurance provider for the MEA Benefits Trust, will now be required to release claims data when it is requested by the local school board.

Although the Maine Education Association Benefits Trust refused to share loss information with school districts, Maine law has entitled holders of insurance policies to obtain such loss information from their carriers since 1989. In 1995, this access was expanded to cover current and former policyholders of group and blanket health insurance.

But the MEABT has always considered the experience ratings and claims history of individual school districts to be a proprietary, confidential trade secret.

“The question reduces to whether the trust, given all of the attendant facts and circumstances, has a probability of success of showing that it had a reasonable expectation that the plan’s loss information will be kept confidential,” according to the Appeals Court judges. “We think not.”

MEABT complained that it was being targeted by a handful of legislators, but the judges rejected that argument, citing the common and lawful practice of insurers releasing the loss information. The reason the MEABT felt singled out “ is merely a byproduct of its holding the predominant share of the targeted market—a virtual monopoly, perpetuated by the very policy of non-disclosure which it seeks to protect,” the judges concluded.