Wisconsin Union Holding Federal Funds Hostage

Federal health care funds are being held hostage by the Wisconsin Education Association Trust, a not-for-profit health insurance company created by the state’s largest teachers union.

The union trust is doing this in a bid to retain its dominant position as the state government’s largest health care insurance provider.

The funds in question derive from the much-maligned Early Retiree Reinsurance Program. Obamacare created ERRP as a taxpayer-funded subsidy intended to lower the cost of early retiree health care.

Instead, the Obama administration has used ERRP funds to give political payback to preferred special interest groups. Top ERRP recipients include the United Auto Workers ($206.8 million), state governments and government unions ($5 billion), and General Electric ($36.6 million). The WEA Trust received a total of $18 million.

The WEA Trust is preemptively suing the state, to withhold ERRP funds from school districts that drop it as their health care contractor, essentially acknowledging that the ERRP is a taxpayer-funded union bailout.

The lawsuit is in response to Gov. Scott Walker’s labor reform, enacted last year, which decreased the collective bargaining power of Wisconsin government unions and dissolved the WEA Trust’s government health care monopoly.

Previously, WEA Trust provided health insurance to two-thirds of Wisconsin school districts under exclusive agreements made possible by the unions’ collective bargaining power. The law enabled school districts the freedom to choose their health insurance providers.

To counter school districts’ newfound freedom, the WEA Trust attempted to strong-arm them into renewing their contracts. In a letter, the WEA Trust informed school districts that it would withhold ERRP funds from any district that switched health care insurance providers.

In the end, such threats failed to persuade the majority of school districts from switching, and for good reason. The MacIver Institute reports that the newly competitive health care insurance market has helped yield an estimated $16,804,605 in total savings.

A new MacIver study reports, “25 districts have reported switching providers or lowering their costs through competitive bids. Amongst these districts, the average savings have been $730,634.99. That comes out to $211.45 per student.”

One would think that the WEA Trust, a not-for-profit created by the Wisconsin Education Association Council, would be thrilled at such savings to union members’ health insurance costs. However, the WEA Trust seems more concerned with retaining its privileged status.

The threats led 14 Wisconsin school districts that dropped the WEA Trust last year to sue to recoup the nearly $3 million in ERRP funds being withheld.

The Hartland-Lakeside school district is leading the charge to recoup ERRP funds. This week Hartland-Lakeside hired Foley and Lardner, LLP to pursue legal action against the WEA Trust.

Hartland-Lakeside superintendent David Schilling stated at least 30 school districts have expressed interest in joining the lawsuit. The school districts lawsuit contends members of WEA Trust in 2010-2011, when the WEA Trust applied for ERRP, are entitled to the funds.

To resolve the lawsuit the WEA Trust continues to use questionable tactics. The Associated Press reported comments of WEA Trust spokesman Steve Lyons, “that any of the 14 school districts that choose not to litigate against WEA could be dropped from the lawsuit.”

Worse, this scenario could be repeated in other states, as state and local governments cut budgets to get their finances in order, and unions, seeing their member dues flow decrease, use ERRP funds to bail out their dwindling coffers at taxpayer expense. The WEA Trust’s parent, WEAC, cut 40 percent of its staff after the passage of Gov. Walker’s bill.

Having lost their privileged status, government unions in Wisconsin are now opposing reforms that lower health care costs for union members. That makes it worth asking: Who is WEAC really looking out for?