New Health Plan for State Employees Could Save Taxpayers Money

Joint Finance Approves Governor’s Plan with Additional Parameters

MacIver News Service | May 21, 2013

[Madison, Wisc…] Governor Scott Walker hopes to lower high healthcare costs the state faces each year by offering state employees the option of selecting a high deductible health plan (HDHP) with a health savings account (HSA) in addition to plans already offered by the state.

The state currently offers employees three options; a fully insured HMO plan from 25 different carriers with a uniform schedule of benefits, a state maintenance plan that is available in counties that do not have a tier one HMO plan, and a standard plan that is a self-insured, preferred provider plan with a schedule of benefits comparable to the first two options.

Under the current plan, state employee health insurance costs are expected to total $1.084 billion with 88 percent or $954.1 million provided by state taxpayers in the form of employer contributions. Employee contributions total $130.1 million and cover 12 percent of the total costs.

Although health care costs in Wisconsin increased at a rate 4.1 percent below the national average from 2008-2013, a HDHP paired with an HSA is seen as a way to reduce costs even further by giving those covered under the plan an incentive to minimize the amount they spend.

HSAs help employees save money for healthcare expenses using pre-tax money earning untaxed interest to help cover increased costs that an employee would face from a higher deductible when they seek treatment. The HSA remains an asset of the employee until the funds in the HSA are depleted, even if the employee is no longer working for the state. The money can be used on medical expenses, like laser eye surgery, that are not covered under the uniform schedule of benefits provided by the state plans currently available.

Additionally, money can be withdrawn anytime for non-health related expenses, but money withdrawn for non-health related expenses is taxed, and if the individual withdrawing the money is under 65 years of age, subject to a 20 percent penalty.

The fact that HSAs are an asset of the employee even if they are no longer working for the state is seen by some as a problem since the unused portion of the employer contribution becomes property of the employee at the end of each year. They also see the ability to use the plan for medical expenses not covered under the other plans as unfair. However, supporters say that the plan can reduce costs for the state and save taxpayer money.

The Joint Committee on Finance voted on Tuesday to adopt the Governor’s plan and add additional parameters to the program. The provisions added by JFC require the Government Insurance Board and Office of State Employment Relations to clarify “the required deductible amounts, the out-of-pocket maximum limits, projected premium rates, the employer contributions to the HSAs, and any other relevant factors to complete the program plan,” according to the Legislative Fiscal Bureau.

The plan from JFC would also require an actuary to then recommend changes to the program that would make it more cost effective. This plan would require the actuary’s recommendations be reported to the Governor and JFC no later than January 31, 2014.

At this time, there are not enough specifics in the plan to accurately determine the cost to implement the HDHP/HSA or the savings that it might offer, but savings from the plan were estimated to be $6,867,700 in 2014-15 according to the administration.