WPRI Study is Deeply Flawed

By Scott Culver
Communications Specialist
WEA Trust

February 2005

The Wisconsin Policy Research Institute (WPRI) is a not-for-profit, but highly partisan organization that makes recommendations on how Wisconsin should spend its tax dollars.

WPRI’s latest report, “Health Insurance for Wisconsin Public Schools – The Case for Competitive Bidding,” suggests that if all public school employees were put into the state health plan, school districts would save $100 million, which could be used to boost teacher salaries.

The report and its recommendations received some backing from media in the state, but the assumptions WPRI uses to reach its conclusion are faulty and show how facts and statistics can be manipulated:

• According to the WPRI report, “If competition were introduced, which would allow school districts to participate in the state health insurance program, the savings across the state would be over $100 million and allow 90% of the districts to lower their health benefit costs.”
  
  Fact: There would be no $100 million savings even under the best scenario painted by this report. The assumptions WPRI uses to reach this conclusion are so flawed that it is difficult to take its conclusions seriously. Here’s why:
  
  WPRI’s savings are based on the assumption that every school district employee in every county would pick the lowest-cost HMO available. This is unrealistic. First, because the lowest- cost HMO isn’t available in many parts of the state and second, employees are likely to choose plans based on which physicians and hospitals are in the plan, not which plan is the cheapest.
  
  In some cases, the lack of attention to detail in the WPRI report is glaring. For example, the report notes that Monona Grove School District would save $80,406, and Yorkville J2 School District would save $76,605 by going to the state plan. Both these schools are already in the state plan.
  
  This report also does a grave injustice to the working families of Wisconsin. Instead of suggesting that legislators deal with the very real crisis of escalating health care costs, WPRI suggests that if public school employees want higher salaries, they should denigrate their benefit package to get it. Rising health care costs are not simply a problem for school districts, but for every business owner and Wisconsin citizen.
  
  
• In the report’s introduction, Jim Miller, president of WPRI, states: “The source of the problem is an archaic system where the teachers’ union insurance company, the Wisconsin Education Association Insurance Corporation, has a virtual monopoly on the health insurance written in 78% of the school districts in the state.”
  
  Fact: The WEA Trust insures about 50% of Wisconsin’s public school employees. Of the 10 school districts that WPRI claims would save the most money by switching to the state plan, only five have a Trust health plan.
  
  The source of the problem is escalating medical costs. According to the Office of Medicaid and Medicare, health care costs have been increasing at a 9.1% rate per year for the last 40 years. Left unchecked, these medical cost increases will devastate not just school districts but most businesses in the state. At this rate, health insurance premiums for almost everyone in the state will double every eight years.
  
  
• The WPRI report implies that there is no competition in the health care marketplace for school districts.
  
  Fact: Competition is alive and well in the business of providing health insurance to public school districts. Under existing law, school districts can choose to join the state plan, can choose to self-insure, or can choose from among a variety of health plans being offered in the marketplace. In fact, many of the state’s largest school districts, such as Milwaukee and Madison, are self-insured. Only two districts, however, have chosen to join the state plan.
  
  
• The WPRI report says that Wisconsin public schools have one of the best fringe benefit packages in the nation.
  
  Fact: In terms of total compensation – that is considering salary and benefits together – Wisconsin teachers rank 16th in the nation. What WPRI does not say is that Wisconsin also has one of the best public school systems in the nation. Year after year, Wisconsin students rank among the top in ACT scores. Attracting and retaining good teachers is a top priority for school districts, especially those in smaller communities. A decent salary and a good benefit package help school districts attract and retain quality employees.
  The WEA Trust has provided a valuable service to Wisconsin public schools, especially small and mid-size districts, by designing benefit plans that are comprehensive in coverage, competitive in price, and an excellent value.
  
  As a not-for-profit company, the WEA Trust returns almost 94 cents of every health insurance premium dollar back to school districts in the form of benefits. It also uses about 6 cents to run the business. Most other insurance companies charge anywhere from 10 to 14 cents, if not more, to run the business. Commercial insurers also have to pad their rates to provide profits to shareholders. The WEA Trust must use all revenues for benefit payments and administrative expenses.
  
  In addition, the Trust treats its members fairly. The Trust’s ratio of complaints filed with the Office of the Commissioner of Insurance is one-fifth the state average.
  
  WPRI could serve a valuable service if it asked legislators to tackle the health care cost crisis instead of gutting the benefit program for the hardworking employees of Wisconsin’s public school system.

Posted February 1, 2005