Wisconsin Gov. Scott Walker's top aide fired back at the Republican leaders of the Legislature's budget-writing committee on Tuesday after they signaled their intent to reject the governor's proposal to self-insure state workers.
"I'm just in disbelief that, when you have the opportunity for $60 million in savings, and potentially more depending on what happens with Obamacare or doesn't happen with Obamacare, that that would be rejected out of hand and not looked at more closely," Department of Administration Secretary Scott Neitzel said in an interview.
Walker on Monday said his administration has negotiated self-insurance contracts that would save the state $60 million during the 2017-19 budget period. The contracts, negotiated by the state Group Insurance Board and Division of Personnel Management, were submitted to the Joint Finance Committee for review.
The committee's co-chairs said Tuesday they plan to reject the agreements. The committee has 21 days to review the contracts, which would take effect in 2018 if approved.
"I think there’s not convincing evidence that we need to do that right now," Joint Finance co-chair Sen. Alberta Darling, R-River Hills, told reporters.
Joint Finance co-chair Rep. John Nygren, R-Marinette, said he looked through the contracts on Monday and found no evidence to back up the projected savings.
"There’s really no there there, as far as, how do they even come up with the estimates," Nygren said. "There is no percentages that are in there that help me understand how they actually came up with the number they came up with."
Neitzel said the argument is simple: the contracts cost the state $60 million less over the 2017-19 biennium than the current plan would.
"It’s not a 'hope for' number, it’s not a projection, it’s a contract," Neitzel said. "And that contract saves state taxpayers at least $60 million over the next two years, and causes almost no disruption for our employees, and does not increase the cost for our employees. There is a lot there, and that 'a lot' is savings for taxpayers in the tens of millions of dollars."
Under the self-insurance model, the state would contract with insurers and third-party administrators to pay for public employees' medical bills directly rather than pay premiums to insurance companies.
The state would move from paying premiums to 18 HMOs across the state to contracting with six health insurance companies to administer the self-insurance program in four regions — north, south, east and west — statewide.
The contracts submitted on Monday are with Compcare Health Services Insurance Corporation, Dean Health Plan, HealthPartners Administrators, Network Health Administrative Services, Security Administrative Services and Quartz.
Walker's budget proposal would direct the $60 million of projected savings from self-insurance to be used to fund a portion of a $649 million boost in per-pupil aid for K-12 education. But lawmakers on both sides of the aisle have been skeptical from the start. Rep. Gordon Hintz, D-Oshkosh, previously likened the setup to a game of Jenga.
If the proposal is rejected, Nygren said lawmakers on the committee will either come up with a plan to find $60 million for education funding in another area of the budget or they will direct the Department of Employee Trust Funds to find a similar amount of savings within the existing system.
Neitzel said he doesn't know whether that could be achieved.
"What I do know is this is $60 million that we know for sure, that causes almost no disruption to our employees and there’s no decrease in benefits or increase in cost to our employees," Neitzel said. "Once you go to self-insurance, it does not preclude you from making other plan changes going forward if those are deemed necessary at the time. So our feeling is that it only makes sense to take these savings, which are the lowest hanging fruit, and then move forward from there."
ETF spokesman Mark Lamkins said without the approval of self-insurance, the only way to reach the $60 million savings target would be to freeze insurer premiums or shift "significant costs" to state and local government employees.
Nygren said he has heard ETF has a "significant surplus" ranging between $60 million and $80 million, and wants to find out whether that's true and how it accumulated.
Asked about those comments, Lamkins said Nygren may have been referring to reserve funds used to protect the program from fluctuations in health care costs.
"The amount set aside in reserves is based on actuarial guidance and adheres to established protocols of the Group Insurance Board," Lamkins said in an email.
Darling, in her criticism of the proposal, cited national uncertainty surrounding health care coverage as Congress considers changing or replacing the Affordable Care Act.
Moving thousands of state employees to a new system could "really affect the economics of our health care system," Darling said.
Neitzel countered that no study or evidence has been offered to back up concerns about market disruption. According to an analysis prepared by the Segal consulting firm for the Group Insurance Board, 98 percent of current providers would still be available under the self-insurance plan.
In addition, Neitzel argued, moving to a more regionalized model would put the state in a better position to implement an effective wellness plan based on patient data that is more difficult to organize and assess under the current system.