Las Vegas Teachers' Union May Force 1,000 Layoffs to Preserve Its Profitable Insurance Company

LAS VEGAS – While the Great Recession has affected almost all Americans, Nevadans may be the hardest hit. The state leads the nation in unemployment (13 percent) and home foreclosures (three times the national average).

Because of the faltering economy and slowed tax revenue, the Clark County School District needs to cut $78 million from its budget over the next two years. The district must do this either by freezing teacher pay and finding a more affordable employee health insurance carrier, or by laying off 1,000 educators as early as next month.

The first alternative is obviously preferable, because students would be adversely affected by larger class sizes and the loss of many enthusiastic young teachers. Unfortunately, the second option may be unavoidable, because the district has been unable to negotiate a new contract with its teachers union, the Clark County Education Association (CCEA).

CCSD is the fifth largest school district in the nation, serving around 310,000 students in 340 schools in and around Las Vegas. The district is also the largest employer in Nevada with some 33,000 employees, 18,000 of which are teachers.

The main sticking point seems to be the district’s desire to find a less expensive health insurance provider. CCEA members currently receive health insurance from the Teachers Health Trust, a company actually owned and operated by their union.

Most people would describe the union’s insistence on selling its own company’s expensive insurance product to the school district as a conflict of interest, but union officials either don’t agree or don’t care.

The teachers union declared a bargaining impasse last summer. While the two sides could conceivably still reach a deal, it seems most likely that an arbitrator will make the final decision about wage freezes and the fate of the union-owned insurance company. The arbiter is legally bound to choose one side over the other.

“There’s no middle ground,” said district spokeswoman Amanda Fulkerson. “If the district wins, no layoffs and a pay freeze. If the union wins, some get raises, and others get laid off.”

Is the union protecting Health Trust?

The question must be asked: Why is the teachers union jeopardizing the careers and financial futures of 1,000 of its members?

CCEA President Ruben Murillo, Jr. has made it clear the union does not want to accept a pay freeze and has charged school officials as being “disingenuous to the public regarding [the district’s] financial situation.”

“Listen, teachers don’t go into teaching to get rich, but they certainly don’t go into the profession to live in the poorhouse,” Murillo recently wrote in the Las Vegas Review-Journal.

A pay freeze would be a hardship for teachers, but it would be nothing more than many other employees in the public and private sectors have accepted in recent years. CCSD’s administrators, support staff and police have all agreed to a pay freeze, “leaving the teachers standing alone,” writes the Review-Journal.

Apparently union leaders and veteran teachers, who are in little jeopardy of layoff, are more interested in a raise than allowing their younger peers to remain on the job and provide smaller class sizes for students. Sadly, that attitude is fairly common among teachers’ unions around the nation. School administrators describe it as union members “eating their young.”

Many observers believe CCEA officials are also determined to preserve the monopoly the union-owned Teachers Health Trust has on the school’s health insurance business.

The Teachers Health Trust was established in 1983, after the Clark County district got fed up with regular rate increases from another carrier.

It was written into the district’s collective bargaining contract with the CCEA that the district would pay a monthly per-employee fee to the union-owned Teachers Health Trust. In return, the union would be solely responsible for managing the insurance fund for members. The CCEA president even selects the individuals who serve on THT’s Board of Trustees.

The deal written into the collective bargaining agreement gives Teachers Health Trust a monopoly on the school’s health insurance business. If other insurance companies were allowed to bid for the district’s business, it would almost certainly drive prices down.

In some states, union-affiliated insurance companies openly share their profits with the union. While we have no evidence that this occurs in Clark County, we have to wonder if the union would stand to lose a lot of kickback money if Teachers Health Trust lost the school district’s $10 million-a-month business.

What we know for sure is that the inability to seek competitive insurance bids has cost the school district a bundle.

The district believes it can significantly trim those costs by switching to a private health insurance provider, although the amount of the savings has not been announced.

“Savings to the taxpayers will be in the millions of dollars, monies which will be used to offset lost positions and potential salary cuts and to fund district programs and operations that enhance student achievement,” reads a district fact sheet.

Union insurance scams in other states

The CCEA is not the first teachers union to form its own insurance company and pressure local school boards into purchasing that company’s overpriced coverage.

The Maine Education Association, the state’s largest teachers union, established its own insurance entity, the Maine Education Association Benefits Trust, in 1993.

The Benefits Trust ” facilitates” the purchase of employee health insurance for Maine’s public schools, essentially selling them coverage provided by the state’s largest carrier, Anthem Blue Cross/Blue Shield.

Nearly every school district in the state has been lulled into joining this system over the years, according to officials in several Maine school districts. The Benefits Trust/Anthem scam, which discourages outside competition, has driven insurance prices through the roof for Maine schools.

The Michigan Education Association owns its own insurance company, called the Michigan Education Special Services Association (MESSA). For years local union negotiators have pressed school boards to purchase MESSA employee health insurance, despite its high cost.

As a result, roughly half of the districts in the state carry some form of MESSA insurance, and many are struggling with the continually rising cost of premiums. As in Maine, many Michigan school officials have accused MESSA of refusing to provide insurance claim records that are necessary to attract bids from competitors.

The Michigan Education Association also receives annual kickbacks from MESSA, in exchange for effective representation at the school board bargaining table. In 2009, MESSA reported net assets of $259 million. In 2010, MESSA shared $5 million with the MEA.

The Wisconsin Education Association Council also created an insurance entity, called WEA Trust, several decades ago. For years local union negotiators pressed school boards to purchase employee health insurance from WEA Trust, often at a very high price.

At one point, about three-quarters of the state’s school districts purchased insurance from WEA Trust, helping the union-affiliated insurance company build assets worth $674 million in 2008, according to government records.

EAG published a 2010 analysis of WEA Trust, which revealed that most of the school districts in the state with the highest insurance costs are clients of WEA Trust. Many school administrators said it was very difficult to convince their local unions to allow them to seek bids for less expensive health coverage.

All three of those union-affiliated insurance companies have attracted close scrutiny since a wave of reform-minded lawmakers were elected in November 2010.

Lawmakers in Maine, Wisconsin and Michigan have recently taken steps to give school districts more freedom to accept competitive bids for employee health insurance, thereby ending or at least eroding the expensive monopoly held by union-affiliated insurance companies.

In Clark County, that job is being left to an arbitrator. All the students and taxpayers can do is hope the arbitrator does the right thing for the school district and community, even if that angers the self-serving union.

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