What the Highlights folks will tell you is that, without owning all the rights, whenever a testing agency would request reprint permission, Highlights would have to tell them to contact the author instead. Since authors change addresses, phone numbers, and last names all the time the testing agencies would have a devil of a time tracking down the needed permissions. It would make it impossibly complicated for them, which is a major reason why they like to use Highlights stories for their comprehension tests. The testing agencies know they can make one phone call to Highlights and secure the rights they need.
Highlights then sends the money to the author. If Highlights has lost track of the author over time, they put the reprint money into their Chautauqua scholarship fund which helps attendees pay for their annual writers' retreat.
They offered me a scholarship a few years back.
So, in reply to your reply...no, Highlights couldn't do all this without owning the rights. They would, instead, direct the testing agencies to try and contact the author. The testing agencies would eventually go elsewhere and the stories would not get reprinted.
The principle is a good one, but the reality here is different.
All too often I hear writers declare they'd never submit to Highlights because of this rights issue and I always feel an obligation to clarify.
You can stick to your principles if you like, but I don't see it as helping your career...quite the oppposite, actually. (And I really cringe when someone implies I must be too timid to stand up for my rights)
Jim
But you have given me something to think about, seriously. I, too, have avoided Highlights, for two reasons: 
