Self-Insurance Dies Today, But Changes Could Still Be Coming To State Health Insurance

MacIver News Service | June 15, 2017

By M.D. Kittle

[Madison, Wis…] Gov. Scott Walker’s plan to move the state’s approximately 250,000 employees and their family members to a self-insurance system is expected to be officially pronounced dead today by the Joint Finance Committee.

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“We are going to say no to self-insurance,” state Rep. Mary Felzkowski, R-Irma, told MacIver News Service Wednesday.

But Felzkowski, a member of the budget committee, said the Republican-controlled JFC has a “suite of ideas” to draw savings from the current state health insurance system – perhaps more than $50 million worth after 2018.

That’s important. The Walker administration projects the self-insurance proposal could save taxpayers $60 million from the basic switch, and an additional $43 million in secondary costs. Opting not to change to a self-insurance model could cost employees significant increases in premiums, and self-insurance would keep the so-called Obamacare tax at bay, saving the state about $22 million.

Joint Finance Committee co-chairman, state Rep. John Nygren (R-Marinette) has said those savings are disingenuous because the Obamacare tax has yet to be collected and “there’s no evidence to show it will be collected in the future.”

The Legislative Fiscal Bureau has estimated savings from a self-insurance makeover at about $47 million. One consultant’s report said the switch could end up costing the state money.

Walker’s 2017-19 budget plan uses the projected savings to help increase funding for public education.

Under the self-insurance model, the state would be responsible for paying benefits and taking on the risk for losses, currently the responsibility of 18 private HMOs.

Felzkowski said budget committee Republicans would “cut ties” to education spending under their health insurance proposals, so lawmakers would need to come up with north of $60 million in funding.

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The legislator, who owns an insurance agency, said the JFC is “encouraging” the Group Insurance Board to follow a number of recommendations, including a state plan redesign that further incentivizes consumer-driven health insurance plans – especially health savings accounts.

“We have very strong language encouraging GIB (Group Insurance Board) to find savings,” Felzkowski said. “One of the ways to find those savings is through plan redesigns, with an emphasis on a customer-driven model.”

She said savings are estimated to run between $30 million and $52 million over the biennium, but acknowledges that it may be too late in the game to hit the high end of the estimates in 2018. Contract negotiations are finalized in August, with enrollment set for October.

There would be funding available to educate state employees on the benefits of HSAs, and “over subsidizing of premiums to induce employees to move into the consumer-driven plans. Felzkowksi said the state’s insurance offerings would increase from a three-tier model to a five-tier model, providing more plan options and more opportunities for savings. Employees would not see an increase in contributions, at least the current percentage would be the same, Felzkowski said.

Premiums for the state’s current uniform benefit plan run around $1,000 per year for individuals. The high deductible HSA plan would cost about $396, according to Felzkowski.

Broader savings to the state would come from a greater awareness of health care costs, the lawmaker said. When consumers are responsible for all health care-related expenses, they make different decisions, Felzkowski said.

Ultimately, she said, the most significant savings could be realized by businesses in the Madison area and other government-heavy communities forced to compete against very generous state benefits.

“It’s obscene,” Felzkowski said. “It is so far away from what the private sector does outside Madison. What is the cost to local businesses and the business community and the greater Madison area forced to offer competing plans with the uniform benefit plan.”

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“We (the state) drive health care costs,” the lawmaker added.

Felzkowski said she wouldn’t rule out self-insurance down the road, but right now the Republican caucus “just isn’t there.” The big concern remains the volatility and disruption that could be created in the health insurance marketplace, a marketplace already hit hard by the Obamacare effect.

But some advocates of self-insurance say the current state health insurance model protects participating insurers to the detriment of taxpayers. Their question is this: If the state can drive cost savings from insurers now, why couldn’t it do it before?

Felzkowski said she can’t answer that question, although she has some theories. The proposed incentives, she said, might just be the “shove needed” to move state employees to a consumer-driven health insurance model.