The state Legislature’s budget committee on Thursday unanimously rejected Gov. Scott Walker’s plan to save $60 million by self-insuring state workers, saying it found $63.9 million in other savings.
Instead of shifting nearly 250,000 government workers and dependents from a system in which they are insured by 17 HMOs, the Joint Finance Committee said it would tap $25.8 million from program reserves, negotiate $22.7 million in savings from the HMOs and find another $15.4 million in savings through benefit changes.
Cost increases to employees — including premiums, co-pays, deductibles, out-of-pocket maximums and other expenses — will not exceed 10 percent, legislators said.
The budget committee also approved additional oversight over the Group Insurance Board, which oversees state workers benefits and recommended self-insurance in February.
Four members are to be appointed by the Legislature to the board, which currently has 11 members and is controlled by the governor, and the budget committee expects to review changes to the state worker program. Walker vetoed similar provisions two years ago.
Walker spokesman Tom Evenson said he wouldn’t comment on potential vetoes this year. But he said Walker would continue to advocate for conservative reforms like self-insurance.
“Moving to self-insurance is a common sense conservative reform that would save taxpayer money without passing on costs to state workers,” Evenson said in a statement.
The Wisconsin Association of Health Plans, which represents many of the HMOs in the program, opposed self-insurance, saying it would disrupt the state’s competitive health insurance market. Many of the HMOs are owned by regional health care systems.
The budget committee’s action “was a vote for competition over consolidation,” Nancy Wenzel, CEO of the association, said in a statement. “We look forward to continuing our relationship in providing the highest quality, most cost-effective health care benefits and services to state employees and their families.”
Budget committee co-chairwoman Sen. Alberta Darling, R-River Hills, said the state’s competitive marketplace is a model for the nation. “With what’s happening nationally, this is the wrong time for us to make major shifts in the marketplace,” Darling said.
Co-chairman Rep. John Nygren, R-Marinette, said that by limiting the budget panel’s involvement in the self-insurance plan, Walker and the Group Insurance Board made it difficult for the committee to support it.
“We’re the board of directors for the state of Wisconsin,” Nygren said. “The fact that we are not involved in that conversation from the beginning. ... We have really no other answer than to say no.”
Rick Badger, executive director of Wisconsin AFSCME Council 32, which represents some state workers, said he is glad the budget committee found the majority of savings from insurance company profits and administrative overhead.
“But, AFSCME is disappointed in the proposed cost hikes for Wisconsin workers,” Badger said in a statement.
The committee identified $63.9 million in savings, instead of $60 million, because Walker’s budget overestimated savings from avoiding an Affordable Care Act fee through self-insurance, Nygren said.
The $25.8 million in savings to the state budget from program reserves would come from tapping a total of $68.8 million in reserves over two years.
Last month, the nonpartisan Legislative Fiscal Bureau said the $144.4 million in reserves last year were $18.4 million more than the maximum and $68.8 million more than the minimum allowed under a 2011 policy.
Under self-insurance, the state would take on the risk for medical claims instead of paying premiums to HMOs. Six insurance companies would administer the program in four regions of the state.
Consultants have said the move could save $40 million a year or cost up to $100 million a year.
Most large employers self-insure, including 46 states that fully or partially self-insure state workers. That list includes Wisconsin, since the state offers a self-insured option, with rich benefits and high employee cost, which a small number of workers choose.
What happens next with state worker benefits is unclear. The Group Insurance Board could still pursue the regionalization portion of the self-insurance plan, requiring HMOs to bid throughout regions instead of in individual counties as is the case today.
The board’s next scheduled meeting is Aug. 30.
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