MADISON, Wis. – Sometimes customers don’t mind overpaying for a product they like and can afford.

But what happens when hard times hit, yet they can’t get out of the bad financial deal?

In Wisconsin, they turned to their elected officals for help, and for once government came through. That’s the topic of a new EAGnews report titled “First Years of Freedom: Wisconsin Schools Saving Millions on Health Insurance in the Act 10 Era.”

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For years hundreds of Wisconsin school districts had purchased employee health insurance from WEA Trust, an insurance company founded and closely associated with the Wisconsin Education Association Council (WEAC), the state’s largest teachers union.

The coverage was comprehensive, pricey and more or less mandatory. That’s because employee health insurance was a topic of collective bargaining, and WEAC negotiators would come to the negotiating table demanding that school boards maintain WEA Trust insurance.

In good financial years that was not a major issue.  Even many school administrators and their families enjoyed the “Cadillac” coverage.

But then the national recession hit in 2008 and state and local tax revenues slowed to a trickle. Cash-strapped schools started looking for ways to cut costs, and the expensive insurance seemed like a natural target, but many local WEAC- affiliated teacher unions refused to allow school boards to drop the coverage.

Many districts were forced to lay off younger teachers and cut student programs while still maintaining high-end health insurance.

That all changed in 2011 with the adoption of Act 10, Gov. Scott Walker’s landmark legislation that limited the collective bargaining power of public sector labor unions. Suddenly health insurance was off the negotiating table and schools were free to choose insurance companies and shape employee coverage without union consent.

The result was – for many school districts – lower health insurance costs for the first time in years.

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In 2010-11, the average cost of single monthly insurance premiums for Wisconsin schools was $754, according to a survey done by the Wisconsin Association of School Boards. The average cost of family coverage premiums was $1,752.

In 2011-12, the first school year Act 10 was in effect, the average cost of single coverage dropped to $693 per month, while the average cost for family coverage dropped to $1,618 per month, according to an EAGnews survey.

That downward cycle has continued in the 2012-13 school year. The average price for single coverage has dropped to $665 per month, while the average price for family coverage has dropped to $1,551, the EAGnews survey indicates.

The lower rates have led to big savings for school districts.

In 2011-12 the Hudson district saved $1.1 million, the Howard-Suamico district saved approximately $1 million and the Elmbrook district saved about $878,000. Other big winners included Pulaski ($513,689), Kimberly ($821,000), Tomahawk ($750,000), Oshkosh ($774,000), Hartland-Lakeside ($500,000), Durand ($500,000) and Edgerton ($500,000).

That list goes on and on.

Trapped into paying top dollar

In 2010 insurance costs were a much bigger problem for Wisconsin school districts, and WEA Trust was the clear culprit.

In our 2010 report, “A Crucial Challenge for Wisconsin Schools: Escaping the Shackles of WEA Trust Insurance,” EAGnews did a comparison of employee health insurance costs in 364 of the state’s 426 public school districts.

The average cost of monthly premiums for single employee coverage in 2010 was $734 for schools with WEA Trust insurance and $614 for those with other companies. The average cost of monthly premiums for family coverage was $1,665 under WEA Trust and $1,466 for those with other companies.

Forty-three of the 50 districts with the most expensive single premiums were insured by WEA Trust. Forty-two of the 50 with the most expensive family premiums were insured by WEA Trust.

On the other hand, 49 of the 50 districts with the least expensive single premiums were covered by companies other than WEA Trust. The same was true for 43 of the 50 districts with the least expensive family premiums.

As one district administrator put it, “WEA had great insurance, excellent insurance, but we paid for it dearly.”

Many school officials wanted to shop for less expensive coverage, but were stopped cold by their local teachers unions and their collective bargaining agreements.

As the Milwaukee Journal Sentinel’s “PolitiFact” put it, “Some contracts required that the district and the union agree on an insurer; some required that the selected insurer offer coverage at least as good as WEA Trust’s; and some contracts actually named the insurer, such as WEA Trust, that had to be used.

“Collective bargaining helped (WEA Trust) hold contracts with school districts for years at a time, without a district even going out for bids. Local WEAC unions valued their health insurance so much that they were unwilling in contract bargaining to switch to another carrier.”

In 2009, for example, the Iowa-Grant school district, facing a $450,000 budget deficit, proposed switching from WEA Trust to another reputable carrier which was offering a 20 percent reduction from the district’s current rates.

But the local union still insisted on WEA Trust coverage, and the stalemate was eventually settled by a state arbitrator, who ruled in favor of the school district.

Liberation under Act 10

Act 10, which became law in the summer of 2011, brought sweeping changes that allowed local school districts a great deal more control over their tight budgets.

School boards were allowed to adjust the terms of insurance coverage, like increasing employee contributions toward monthly premiums (most chose a state-recommended rate of 12.6 percent), and adjusting deductibles and co-pays.

They were also allowed to unilaterally choose the insurance company providing the coverage. Unions were no longer in a position to demand WEA Trust insurance.

School boards across the state immediately went insurance shopping, and many had three or four companies bidding for their business. Many districts switched carriers at the first possible opportunity, when their existing union collective bargaining agreements expired in 2011 or 2012.

The results were obvious and breathtaking.

In 2010-11, the fiscal year before Act 10 became law, only 51 of 316 school districts surveyed had lower single coverage insurance rates than the year before, while only 46 had lower family rates.

In 2011-12, 194 of 312 surveyed districts had lower single rates and 199 had lower family rates.

In 2012-13, 139 out of 268 surveyed districts had lower single rates while 140 had lower family rates.

A long list of districts experienced savings ranging anywhere from 20 to 50 percent or higher.

The Independence school district switched from WEA Trust to the Gunderson Lutheran Health Plan in 2011. The cost of single coverage for the district dropped from $868 per month to $499 in 2011-12, while the cost of family coverage dropped from $1,969 to $1,165.

The overall result was a first-year savings of $368,739 for the small district.

“The staff was not happy with the required change, but the dollars associated with the costs of the WEA plan did not make sense under budget constraints,” Marita Halama, the district’s bookkeeper, told EAGnews. “The board of education determined that change was absolutely needed in order to preserve staff numbers and quality of education, so the change was made.”

The Potosi district switched from WEA Trust to Medical Associates of Dubuque, Iowa in 2011-12. The cost of single coverage dropped from $866 per month to $438 while family premiums dropped from $1,970 per month to $994.

First-year savings for the district were around $200,000.

An editorial in the Tomah Journal summed up the situation across the state: “School districts for too long have been forced by collective bargaining to carry expensive and wasteful health insurance packages. Act 10 has been a blessing for school districts struggling to cope with metastasizing health insurance costs.

“District after district has found cost-effective alternatives that still leave its employees with better coverage than most private sector employees get.”