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Fiscal bureau: Self-insurance savings $13 million less than projections

Wisconsin budget committee co-chairs Rep. John Nygren and Sen. Alberta Darling are calling for an audit of the state employee health insurance system.

Gov. Scott Walker’s proposal to self-insure state employees would save $17 million less than previously thought, the Legislative Fiscal Bureau reported Wednesday.

The nonpartisan agency’s report, which said the move would save $65 million over two years, not $82 million, dealt another blow to the proposal, which legislative Republicans have already rejected. Walker tried to revive the plan last week, saying workers would face 10 percent premium increases next year under the current group health insurance plan system.

The fiscal bureau also said the state’s health insurance reserves last year were $18.4 million more than the maximum and $68.8 million more than the minimum allowed under a 2011 policy. The $144.4 million in reserves equaled 28.6 percent of claims, above the thresholds of 15 percent to 25 percent.

The Republican leaders of the Joint Finance Committee highlighted the findings Wednesday as reasons they are rejecting the governor’s self-insurance plan. They called for a legislative audit of the state worker health insurance program.

“If they have all this growth (in reserves), why didn’t they give the money back to the consumer?” said Sen. Alberta Darling, R-River Hills. “They kept the money themselves. We’re concerned about that.”

Mark Lamkins, spokesman for the state Department of Employee Trust Funds, said the Group Insurance Board didn’t withdraw reserves last year because the state negotiated low premium increases for this year and was preparing to begin self-insurance in 2018.

Under self-insurance, which is used by many large employers, the state would take on the risk for medical claims for 250,000 state and local government workers, and family members, instead of paying premiums to 17 HMOs, which currently accept the risk.

Many of the HMOs, including Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus and Unity Health Insurance in Dane County, are owned by regional health care systems around the state. Some could lose business under the proposal.

Walker spokesman Tom Evenson said moving to self-insurance remains the best option to save the most taxpayer dollars.

Department of Administration Secretary Scott Neitzel said last week that self-insurance would save $103 million in the upcoming two-year budget. That amount included a consultant’s estimate of about $60 million in savings, plus $22 million in savings from avoiding an Affordable Care Act fee.

It also included $21 million in savings based on the consultant’s projection of a 10.4 percent increase in group health insurance premiums. Walker’s original budget projected a 7 percent increase.

The fiscal bureau put the base savings at $47 million over two years and the Affordable Care Act savings at $18 million, because the administration used an inflated figure in calculating the savings.

A different consultant previously hired by the state said self-insurance could save $20 million a year or cost up to $100 million a year.

The fiscal bureau also noted that state worker premiums have gone up an average of 3.7 percent a year over the past nine years, including two years in which changes to state employee benefits reduced premiums. Excluding those years, the average annual premium increase was 5.3 percent.

The average preliminary premium increase over the past nine years has been 7.6 percent. But the administration has been able to negotiate tens of millions of dollars in savings to knock the final increase down to 3.7 percent, according to the fiscal bureau.

Phil Dougherty, senior executive officer for the Wisconsin Association of Health Plans, which opposes self-insurance, said the administration’s 10.4 percent projected increase in premiums is based on the state’s assumptions and not health plan bids, which aren’t due until June 30. “The only way the state can be certain of its costs — or savings — is to fix its payments with a fully insured benefit program,” Dougherty said.

If the Legislature rejects self-insurance, it would have to come up with $60 million in savings in other areas to balance the budget. Walker had tied those savings to increased funding for K-12 education, which Republican lawmakers have said they want to preserve.

Budget committee co-chairman Rep. John Nygren, R-Marinette, said his goal is to direct the administration to find similar savings in group health insurance plan design changes. Darling said the Group Insurance Board will need greater oversight going forward.

“The fiscal bureau’s paper really reassured us that we’re making the right decision,” Darling said.


Matthew DeFour covers state government and politics for the Wisconsin State Journal.

David Wahlberg is the health and medicine reporter for the Wisconsin State Journal.