A proposal to shift state employee health benefits from a competitive HMO model to a self-insured program could be gathering momentum, with Gov. Scott Walker scheduled Tuesday to discuss the matter with health plan executives.

A committee of the state’s Group Insurance Board, which oversees state employee health benefits, is set to take up the issue Oct. 11.

Employers that self-insure pay benefits directly and assume the risk for losses instead of buying insurance plans to deliver benefits and cover the risk. Such employers still typically hire insurance companies to process claims and contract with providers.

Wisconsin contracts with 18 HMOs in various parts of the state, and employees choose among them, in what is known as a fully insured program.

At least 20 states have self-insurance programs for all state employees, according to the National Conference of State Legislatures.

A report by Deloitte consultants in October 2012 said Wisconsin could save $20 million — but might spend $100 million more — by switching 236,000 state employees and their family members to a self-insurance model.

A follow-up analysis by Deloitte this August said the state could save 4 percent to 5 percent a year by becoming self-insured. The savings would come mostly from avoiding taxes and fees under the Affordable Care Act for fully insured health plans.

The same report said, however, that the state’s current “managed competition” arrangement saves 4 percent to 5 percent a year. Self-insurance could force some workers to find new doctors and pay a higher proportion of their medical bills, the report said.

Switching to a self-insured program “may be advisable in some regions of the state,” the report said, if insurance companies that get substantial discounts from doctors and hospitals handle claims in those regions.

The report said the state should seek formal, binding proposals from insurance companies interested in administrating the self-insured program and study the issue further. The earliest potential starting date for self-insurance would be Jan. 1, 2015.

The Group Insurance Board committee will consider seeking the proposals Oct. 11, said Rob Marchant, deputy director of the Department of Employee Trust Funds, which oversees state employee benefits.

“If on balance they received a proposal they wanted to proceed with, they could, but they aren’t bound to,” Marchant said. “This is a way that they can get actual solid numbers and data.”

Walker’s spokesman, Tom Evenson, said the governor planned to meet Tuesday with health insurers and providers to receive input on proposals before the Group Insurance Board.

The Wisconsin Association of Health Plans — which represents 10 HMOs in Wisconsin, including the four main ones in Dane County — planned a conference call for members Tuesday morning to prepare for the meeting with the governor.

An agenda for the call makes it clear the meeting with the governor will focus on the self-insurance proposal.

The association is against the proposal, saying it would increase the state’s health costs by $200 million or more, disrupt patient-provider relationships, create instability in the Medicaid program, increase financial risk to the state and result in the loss of nearly 1,000 jobs, the program says.

“Self-funding the State Plan using a single-payer/administrator system would threaten Wisconsin’s competitive health insurance market by eliminating 15 percent of the fully insured market,” a statement by the group said.

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or 608-252-6125; contact Steven Verburg at sverburg@madison.com or 608-252-6118; contact Matthew DeFour at mdefour@madison.com or 608-252-6144.


Steven Verburg is a reporter for the Wisconsin State Journal covering state politics with a focus on science and the environment as well as military and veterans issues.