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Collective Bargaining and Competitive Costs: The Case of WEA Trust

Posted By James Sherk On March 22, 2011 @ 11:00 am In Economics | Comments Disabled

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Everyone knows that competition keeps prices down. However, collective bargaining eliminates competition, and downward pressure on costs, by giving government unions a monopoly. It forces voters’ elected representatives to employ workers on terms the union accepts. With collective bargaining the government cannot shop around to get taxpayers a better deal.

Unsurprisingly, giving government unions this monopoly tends to make government more expensive – and not just through higher wages and benefits. Nowhere is this on better display than in Wisconsin.

The Wisconsin Education Association Council (WEAC), the state’s education union, created their own company to provide health insurance – WEA Trust [2]. Through its powers as Wisconsin teacher’s only bargaining representative, WEAC insists that school districts to buy health coverage from their trust. Usually they get their way. Fully 64 percent of Wisconsin school districts use WEA Trust. [3]

This is great for WEA Trust – but not for the Wisconsinites whose taxes pay for it. Since the WEA shelters WEA Trust from competition it has less incentive to offer competitive rates. WEA Trust charges higher premiums than competing carriers for similar health insurance policies and offers very generous benefits.

Those school districts that do manage to negotiate other insurance carriers see their costs fall. On average, the 18 districts who were able to switch plans saved $282,079 their first year. As Deb Huppert, the business manager for the Prescott School District, explains “WEA has great insurance, excellent insurance, but we paid for it dearly. [The new carrier] wrote us a plan comparable to WEA. Put side to side overall, it’s actually a better plan.”

Statewide, analysts estimate that Wisconsin taxpayers would save between $68 and $114 million if school districts switched to different health insurance carrier [3]s. Naturally, the Wisconsin Education Association does not want this to happen..

Collective bargaining gives the Wisconsin Education Association the power to insist that school districts buy health insurance from the trust they created. If that means that taxpayers have to pay more, they are fine with that – another reason why government unions should not have a monopoly on the public workforce.

Co-authored by Forrest Ball. Ball is currently a member of the Young Leaders Program at The Heritage Foundation.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2011/03/22/collective-bargaining-and-competitive-costs-the-case-of-wea-trust/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/union-protests.jpg

[2] WEA Trust: http://www.weatrust.com/wea/weamain.nsf/main

[3] Fully 64 percent of Wisconsin school districts use WEA Trust.: http://www.publicschoolspending.com/wp-content/uploads/2010/11/WEATrustfinalreport1.pdf

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