The state will seek bids this summer from companies looking to run a self-insurance program for state workers, on a regional or statewide basis, starting in 2018.
The Group Insurance Board, which oversees benefits for state workers, on Wednesday authorized the state Department of Employee Trust Funds to request proposals for self-insurance to better determine the cost and impact of such a program.
“We will never be able to make a decision unless we have the information,” insurance board chairman Jon Litscher said. “We will never be able to have the information unless we (get bids).”
A consultant has said Wisconsin could save $42 million a year through self-insurance, in which the state would pay medical benefits for nearly 250,000 state workers and family members directly instead of buying insurance from 17 HMOs. Gov. Scott Walker has said he would spend any savings on public education.
But another consultant said the move might cost $100 million a year. Some legislators and the Wisconsin Association of Health Plans, which represents 12 of the 17 HMOs, said the change could threaten the stability of the state’s regional health care system. Many of the HMOs are owned by providers around the state.
Herschel Day, an insurance board member, said getting bids from companies could clarify whether the move would save or cost money before the board makes a decision.
“We owe that to the members of the state to do that,” Day said.
ETF plans to issue its request for self-insurance proposals in July, with bids due by September. Results are scheduled to be shared with the insurance board in November, when the board is expected to decide whether to start self-insurance in 2018.
Mike Bare, research and program coordinator at the Community Advocates’ Public Policy Institute in Milwaukee, said the state is moving toward a “government takeover” of state worker health coverage. He said the state should use the Affordable Care Act marketplace instead.
“Self-insuring the state worker plan will remove choices and disrupt competition in the private insurance market,” Bare said in a statement. “It puts taxpayers at risk of paying higher health costs.”
Companies making bids will have to demonstrate adequate provider access in the regions they propose to serve, be willing to sign three- and five-year contracts and provide information on finances and program structure that will help officials decide if self-insurance makes sense.
“For example, information will allow the (insurance board) to weigh the pros and cons of a self-insured program under a regional structure using multiple insurers versus a single, statewide administrator approach,” Lisa Ellinger, an ETF administrator, said in a memo to the board.
Twenty states self-insure all state employees, and an additional 26 states self-insure some of their workers, according to the National Conference of State Legislatures.
Wisconsin self-insures less than 5 percent of state workers, through a plan outside of the 17 HMOs administered by Monona-based WPS Health Insurance.
Of nearly 250,000 state and local government workers and their family members in the $1.4 billion health benefits program, almost 100,000 are in Dane County. Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus, Unity Health Insurance and WEA Trust compete for their business.
Segal Consulting said in November that the state could save $42 million a year through self-insurance, largely by avoiding $18 million in Affordable Care Act fees, cutting $11 million in administrative costs and eliminating $11 million in insurance company profits.
The move would also give the state more control over benefits, which would help it avoid the health law’s planned “Cadillac” tax on rich benefit programs, Segal said.
But the Wisconsin Association of Health Plans in January questioned Segal’s findings, noting that Congress in December suspended the Affordable Care Act fees for 2017 and delayed the “Cadillac” tax from 2018 to 2020.
ETF’s previous consultant, Deloitte, said in 2012 that self-insurance could save $20 million a year but might cost $100 million a year more.
Deloitte assumed many of the discounts currently negotiated with the state would go away under self-insurance, while Segal “assumed all current discounts would continue,” Ellinger said in the memo.
Ellinger said that “Segal collected more in-depth data for the most recent analysis.”
The insurance board is separately considering another proposal to 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.
The insurance board on Wednesday also approved other requests for proposals — for a wellness program, a pharmacy benefit manager and data warehousing.
Last year, the board doubled most out-of-pocket costs for medical services this year, though premiums are down slightly.