Walker defends plan to self-insure state employees

Photo by Michelle Stocker, The Capital Times

Gov. Scott Walker downplayed concerns from lawmakers who’ve been skeptical of his proposal to self-insure state employees, calling the expected savings an “incredible amount” that would be re-invested in public schools.

Walker told reporters Tuesday that lawmakers would have to replace the expected two-year savings of $60 million if they nixed the plan. His budget proposal allocates half of the savings toward a per-pupil increase in K-12 schools.

“The Legislature can make alternatives, but they’re going to have to come up with the money,” he said after an event at the Capitol.

The state’s Group Insurance Board, largely made up of Walker appointees, decided to move forward with self-insurance last week. But the Legislature’s Joint Finance Committee will have the final say once the contracts are drawn up. Both GOP leg leaders, Speaker Robin Vos and Senate Majority Leader Scott Fitzgerald, have been skeptical of the self-insurance concept.

Under self-insurance, the state would work with third-party administrators to pay employees’ health bills directly, rather than pay monthly fixed premiums to health insurers.

Critics have questioned the broader market effects that could come from self-insuring, including how it would affect health insurers whose customer base is made up of larger chunks of the state employee pool.

Last week, Fitzgerald, R-Juneau, raised concerns that those insurers could lay off employees, particularly in Dane County.

But Walker said he doesn’t “believe that,” saying there won’t be major disruptions and that the state is only looking to shift its payment system “in a way that’s more cost effective for the taxpayers.”

“The taxpayers don’t want us to ask them to pay more money to prop others up,” Walker said. “They ultimately want to make sure that we’re getting the best bang for our dollar.”

A coalition of health care groups, including the Wisconsin Association of Health Plans, has opposed the move, saying it will significantly disrupt the state’s health care marketplace. The health plans association noted last week Walker’s proposal abandons “market competition and consumer choice in favor of consolidation, more government control and new financial risk for the state.”

It noted the state had earlier projected other less drastic changes would lead to similar savings but the state “chose to gamble with taxpayers’ money by moving to self-funding.”

Other members of the coalition include the Wisconsin Hospital Association, the Wisconsin Medical Society and the Rural Wisconsin Health Cooperative.

Walker said research “very clearly shows” the move would benefit taxpayers.

The $60 million figure stems from an analysis that the consulting company Segal conducted for the Group Insurance Board.

Mark Lamkins, a spokesman for the Department of Employee Trust Funds, said it’s the consultant’s midpoint estimate, which was between $40 million and $87 million.

To reach that figure, Segal and ETF reviewed specific pricing information from bidders and health care providers to see how much a new structure would save the state. In a letter to the Joint Finance Committee, Segal emphasized “none of the anticipated savings will come from reductions in participant benefits.”

The letter also detailed several areas described as improvements:

*Simplifying the administration of the program. The proposal would reduce the number of companies the state works with from 18 to six, which critics say removes the advantages of the current competitive system. The proposal would also have the state enter into three-year contracts, instead of having a yearly negotiation process with insurers;

*The state, not insurers, would be in control of health claims data so it can better analyze trends;

*Giving employees access to more Wisconsin providers. Under the proposal, the state would work with Anthem Blue Cross Blue Shield’s HMO, Compcare, on a statewide basis and set up four regions where Compcare and five other companies would enroll state employees.

The Group Insurance Board was considering a wide range of restructuring options, including tweaking the current program or keeping some version of it. But the letter says the options were “higher risk in terms of whether savings would be achievable and sustainable.”

The state could also avoid $30 million a year in Affordable Care Act fees by self-insuring, though that figure wasn’t included in the savings estimate since it’s unclear whether the law will remain.