Why this is life and death for the unions

In reading about the Wisconsin stand-off, I ran across this thread at Newsbusters . The last comment is so important, it deserves a post, I think. I can’t verify this story but I have spent some time with union health plan administrators.

Would someone please note that Unions make the great lion’s share of their $ from negotiating “benefits”, not salaries… or collection of dues.

This is why the decoupling of the Salaries and Benefits is so important to Unions in Wisconsin. And why the Union’s have countered the way they have. They’ll give up Salary and Jobs for Teachers in a second, but they will fight to death for the Benefit negotiation position. In another life as an executive in CA, I used to do administration for two Teamster’s “Health and Welfare” benefit packages. Do your research, but you’ll find I’m correct about motivation of Unions. I also believe that the amount of money kept by Unions will be very interesting to both your viewers, and the tax payers of the US of A. The way it works is that the Unions negotiate with the “Employer” regarding how much money per member/per month they will need to support the benefit options required in Union contract. In the case of WI, they negotiate with each of the 77 counties. Then the Unions negotiate the terms of benefits with “providers”/Ins Co’s, etc. They make the lion’s share of their money off of what is called the “breakage” created by Employees choosing between plan options, and the administration of the programs.

Let me explain with an example: A Union begins by negotiating with the Employer/State. They’ll claim their buying leverage will afford Employer significant savings. They’ll end up with a 3-tiered cost structure which allows the Union a profit even with the highest benefit option available as Union already has a very good idea about what Providers will be charging. But it gets even more lucrative for Unions at this point. Let’s say high-end Blue Cross PPO coverage costs $400 for the Family tier. What a Union will do is require $425 from Employer, plus a loaded in admin fee, as a charge for all Families in the employer group. So far, so fair? But, the Union will also offer a few other plans for Employees to choose from. The Union will also have developed relationships with a few cheaper HMO plans, and lesser PPO benefit structure plans that charge, as an example, $325 and $375, respectively.

At an Open House, employees will choose what fits their needs and the Union is in line for the “breakage”. The left over breakage is then, to my experience, placed in a fund where only the Union has the checkbook. Cars, Vacations and Condo’s, oh my. The Union also makes a “commission” off of things like Pre Legal, Dental and Term Life. As another profit source, the Union also leans on the Administrator for favors I’d rather not list, but usually involving idiocy like buying thousands of dollars of “raffle tickets” and leasing cars for the Union’s Business Agents, not entirely above board. Of course, I am relating my experience, and what little I know of others who also did Union administration. I’d expect any simple research by an actual reporter would open up a Pandora’s box of Slush in the Badger State.

Very revealing comment. This is why “benefits” is such a life and death issue for the unions.

9 thoughts on “Why this is life and death for the unions”

  1. Just because an organization is non-profit doesn’t mean it isn’t revenue seeking or that the people at the top are not raking it in. People forget that.

    Everybody has a profit-motive, a power-motive or usually both. The idea that only employers are greedy is just stupid.

  2. But Wait!! There’s more!!!

    To the best of my knowledge, all the state constitutions that “guarantee pensions” do NOT guarantee health benefits. Hence, states are free to re-negotiate that part of contract anytime they want.

    Pigs get fat, Hogs get slaughtered.

    Slaughter the hogs.

  3. Shannon…”Just because an organization is non-profit doesn’t mean it isn’t revenue seeking or that the people at the top are not raking it in”

    Indeed. Being a non-profit means that there are no pesky shareholders to share the loot with.

  4. Michael – Here in WI, the teacher’s union WEAC has it’s own health insurance org which has become the “preferred” heath insurance provider for school districts. Apparently, it has been used for years to the detriment of the school districts and it’s taxpayers. The MacIver Institute did a report on the scam some time ago. I will try and find it and post I link.

  5. Here is another link to the MacIver Institute the study of the WEA Trust:

    MacIver Study Shows Need for School Districts to Shop Around for Health Insurance
    For Immediate Release, January 25, 2011


    The use of a hidden upcharge on benefits is interesting. If true, and unknown to the teachers, my guess is they would not be very happy about it.

    The WEA should fear annual re-certification, and right to opt out! Accountability and choice. Let them prove their worth to the people they want to represent!

  6. Average annual cost of family coverage for the teachers in the school district our business is located in $22,000 with no employee contribution required. Average annual cost of family coverage in our business $12,000 with employee contribution of 12%. We just received our May 1st renewal up 16%.

    My advise to WI teachers. With all due respect, go back to work, carefully consider the “value” of your union and consider firing them. And lastly, stop whining and make the best of a not so good situation like the rest of us are. Maybe its just me.

  7. As someone who worked in non-profits for nine years, I can assure you that you simply can NOT be cynical enough about them.

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