Shifting state worker health benefits from a competitive HMO model to self-insurance, which a state-hired consultant said would save at least $50 million a year, would have “seismic implications,” the head of a Madison-based HMO said Thursday.
“The agenda is clearly to bring in a national, for-profit player ... that will come in and save money and disrupt local health care,” said Kevin Hayden, CEO of Group Health Cooperative of South Central Wisconsin.
Hayden’s comments, in response to a Segal Consulting report Wednesday saying Wisconsin could save $50 million to $70 million a year with self-insurance, came during a HealthWatch Wisconsin conference organized by ABC for Health of Madison.
The conference also addressed a pending Supreme Court ruling about subsidies on the Affordable Care Act’s federal exchange and the proposed changes to Wisconsin’s BadgerCare coverage for childless adults.
Segal’s report to the Group Insurance Board, which oversees a $1.4 billion health benefits program for 240,000 state workers and family members, said self-insurance isn’t feasible next year but could work starting in 2017.
The state would pay benefits directly instead of buying insurance from 18 HMOs, including Group Health.
Reports from previous consultant Deloitte said self-insurance could save $20 million or cost up to $100 million.
Hayden said self-insurance could be costly because the administrator would not get the medical care discounts offered by health systems affiliated with Wisconsin-based HMOs.
“This is a fundamental flaw in thinking around going self-insured,” he said.
Roughly a fifth to two-fifths of people with Group Health, Dean, Physicians Plus and Unity insurance are state workers, most of them in Dane County.
Losing their business would increase rates for others, Hayden said.
“We would have to pass that reduced revenue on to our new customers,” he said.
Hayden said premiums could also “skyrocket” if the Supreme Court invalidates government subsidies to help pay for premiums on the federal exchange. A ruling is expected by June.
Without the subsidies, many of the 207,000 Wisconsin residents on the exchange likely would drop insurance, leading insurers to charge others more, Hayden said.
Kevin Moore, Medicaid director for the state Department of Health Services, said the state is monitoring the situation to see what states or Congress could do if the subsidies go away.
Democratic lawmakers have introduced a bill to create a state-run exchange that would still qualify for the subsidies.
In Gov. Scott Walker’s proposed budget, nearly 150,000 childless adults with incomes below the poverty level could have to start paying premiums for BadgerCare.
Childless adults could also be limited to four years of coverage, required to take health risk assessments and, like recipients of FoodShare and unemployment insurance, be subject to drug testing.
Jon Peacock, research director for the Wisconsin Council on Children and Families, said the drug testing proposal seems “heavy on sanctions” and “light on treatment.”
But Moore said the state would direct people who test positive for drugs to “the treatment that they need so they are able to move back into the workforce.”