Self-insuring state employees might not affect workers’ benefits and premiums, and it wouldn’t pose much financial risk to the state, a UW-Madison business professor said Tuesday.
But the move could disrupt the health care system — especially in Dane County, where several provider-owned HMOs compete for state workers, Justin Sydnor said during a UW-Madison faculty forum.
“There is a risk that a move like that could destabilize and change our provider network and our general health care system,” Sydnor said.
If some providers fail and are taken over by others, “that concentration has been shown, in many places in a lot of good research, to lead to rising health care costs,” he said.
Sydnor said, however, that it’s unclear how self-insurance might work for state workers — how many companies might administer the program, and whether any might be from out of state — until bids come in later this year.
“The devil in the details here is what a third-party administrator system might look like,” Sydnor said. “How we roll it out, if we roll it out, would matter a lot.”
Sydnor joined a state administrator and a community advocate in discussing a state proposal for self-insuring state workers at the forum, sponsored by the Public Representation Organization of the Faculty Senate, or PROFS.
UW-Madison employees make up a large portion of the nearly 250,000 state and local government workers, retirees and their family members who would be affected by the change. About 100,000 members of that group are in Dane County.
Under self insurance, the state would pay benefits directly and assume the risk for large claims instead of buying insurance from 17 HMOs.
Most states self-insure some or all state workers.
The Group Insurance Board, which oversees the $1.4 billion benefits program, last week authorized a request for self-insurance bids, which are expected by September. The board’s decision on whether to make the switch, in 2018, could come in November. The state Legislature’s budget committee could overturn it.
Consultants have said the move might save $42 million a year or cost $100 million a year more.
Lisa Ellinger, director of the Office of Strategic Health Policy for the state Department of Employee Trust Funds, which administers state worker benefits, said evaluating self-insurance is separate from how many health plans and which providers are involved, and whether benefits change.
“We’re really talking about the financial construct,” Ellinger said.
A separate proposal before the Group Insurance Board, however, would offer no more than two health plans in each of three regions, plus a statewide plan. That could save $45 million to $70 million a year, according to Segal Consulting.
While the state would be on the hook for unexpected large medical claims under self-insurance, instead of the 17 HMOs, the state worker group is large enough that it wouldn’t be much of a financial risk, Sydnor said.
But Mike Bare, research and program coordinator for the Community Advocates Public Policy Institute in Milwaukee, said money for state worker benefits might have to compete more with other state interests. In bad budget years, workers might have to pay the full cost of medical care up front, he said.
“Do we want government employees’ health premiums competing with roads and tax cuts and schools and everything else?” Bare asked.
Sydnor said any disruption from self-insurance might be greatest in Dane County, where Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus, Unity Health Insurance and WEA Trust compete for the state worker business.
He said there might be changes in benefits and premiums under self-insurance, but “those things are all on the table in the current system as well.”
Whatever system the state uses, pressures to drive down health care costs likely won’t be going away soon, Sydnor said.
“There really aren’t a lot of free lunches or easy wins in health care,” he said. “Nobody has magic formulas for how to make health care way cheaper.”