The Group Insurance Board on Wednesday approved a plan to change the way Wisconsin pays for health insurance for nearly 210,000 state workers, retirees and dependents, many of whom live in Dane County.
The move to self-insure the $1.5 billion program also covers nearly 40,000 workers and dependents from local governments that have joined the program. They include the city of Madison’s 7,000 workers and dependents.
Gov. Scott Walker said the change will save the state $60 million over the next two years, which will go to public education.
Here are answers to some frequently asked questions about the planned change.
Q: What is self-insurance?
A: It’s when employers pay for medical benefits directly, through third-party administrators, instead of paying premiums to insurance companies. Employers, instead of insurers, accept the risk for unexpectedly high claims. Sometimes employers buy stop-gap coverage to protect against the risk.
Q: How common is self- insurance?
A: Among large employers like the state, it’s common. Twenty states self-insure all state employees and 26 others self-insure some state workers, according to the National Conference of State Legislatures. Wisconsin’s program already self-insures dental and pharmacy benefits, and less than 5 percent of workers are in a self-insured medical plan. The shift would self-insure the whole program.
The Alliance is a Madison-based group of 245 employers, including Land’s End, Stoughton Trailers, Trek and Woodman’s Markets, that self-insure. Nationwide, 82 percent of covered workers at employers with 200 workers or more are in health plans that are partially or completely self-insured, according to the Kaiser Family Foundation.
Q: Why is the state making this change?
A: The insurance board and the state Department of Employee Trust Funds (ETF) said they want to contain costs while maintaining provider access, benefit levels and quality of care.
Self-insurance would also give the state more control over data on how workers use health benefits, which could improve wellness and disease management efforts, state officials said.
Q: Will it really save money?
A: The insurance board said it will save at least $60 million over two years, with an additional $30 million in savings from avoiding Affordable Care Act taxes.
In 2015, Segal Consulting said the shift could save $42 million a year, largely by avoiding $18 million in Affordable Care Act fees, cutting $11 million in administrative costs and eliminating $11 million in insurance company profits. Earlier, Segal said the move would save $50 million to $70 million a year.
Deloitte, the state’s previous consultant, said self-insurance could save $20 million a year but might cost $100 million a year.
One reason for the different estimates is that it’s unclear how rates health care providers charge would change under self- insurance.
Q: Will my premium go up?
A: For people in the state program, it’s not clear. Premiums could go up under self-insurance or under the current structure, known as fully insured. The state won’t release premium rates for 2018 until the fall, when open enrollment takes place.
“If anything, this might help hold (premiums) down in the short term if the savings estimates turn out to be correct,” said Justin Sydnor, an associate professor of risk and insurance at UW-Madison’s School of Business.
The state worker program makes up nearly 15 percent of Wisconsin’s fully insured health insurance market. Removing that business could trigger consolidation that might drive up insurance costs for others, some say.
“Over time there is some risk that this move could make our entire system a little bit less competitive,” Sydnor said. “That could end up raising costs for everyone.”
Q: Will my benefits change?
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A: In the motion adopted Wednesday, the insurance board said it aims to “maintain employee benefits as they currently exist.” An ETF memo uses slightly different language, saying the board “would like to minimize benefit changes for next year.”
Benefits, like premiums, could change whether the state becomes self-insured or remains fully insured, though it could be somewhat easier for the state to make changes under self-insurance.
Under the current system, the state doubled the main out-of-pocket costs for medical services in 2016, though premiums went down slightly.
Q: Will I have to switch doctors or clinics?
A: For most people, probably not, according to ETF. Some 98 percent of providers in the current program are expected to remain. Lists of doctors and clinics covered under self-insurance won’t be available until fall.
Q: If premiums, benefits and providers might not change, why is this such a big deal?
A: In addition to the potential disruption for employees, the move could disrupt the state’s competitive health insurance market, especially in Dane County, according to the Wisconsin Association of Health Plans. Wisconsin is unusual in having many insurance companies around the state that are owned by regional health systems.
“This is a proposal that is making potentially quite large and dramatic changes to a system that seems to be functioning fairly well,” Sydnor said. “You worry that we might create a problem where one doesn’t fundamentally exist.”
In Dane County, four provider-owned HMOs cover most people in the state program: Dean Health Plan, part of SSM Health; Group Health Cooperative of South Central Wisconsin; Physicians Plus, part of UnityPoint Health; and Unity Health Insurance, part of UW Health.
The state selected Dean and Unity — through an affiliate called Quartz that also includes La Crosse-based Gundersen Health Plan — to administer the self-insured program in southern and southwestern counties. Physicians Plus is merging with Unity.
Group Health would be a provider through Quartz, allowing 15,000 of Group Health’s 75,000 members who are insured through the state program to keep going to its clinics, said Dr. Mark Huth, Group Health’s CEO.
WEA Trust, based in Madison, has 82,000 members, 22,000 of whom are in the state program, outside of Dane County. It was not selected.
Q: What happened when other states switched to self-insurance?
A: Minnesota shifted from a competitive HMO model to self-insurance for its state workers in 2000. Unions and state officials liked the change, the State Journal reported in 2013.
However, Minnesota had just three companies in its HMO model before one dropped out, prompting the shift to self-insurance. That is very different from Wisconsin’s system.
Q: What happens next in Wisconsin?
A: ETF will negotiate contracts with the vendors that were announced this week and submit its plan, likely in April, to the state Legislature’s Joint Finance Committee. The budget committee will hold a hearing before deciding whether to approve the plan, said state Rep. John Nygren, R-Marinette, co-chairman.
Nygren and state Sen. Alberta Darling, R-River Hills, co-chairwoman of the committee, along with other Republicans and Democrats, have expressed skepticism about self-insurance and concern about its impact on the statewide health care market.
Q: What is the Group Insurance Board?
A: It’s an 11-member board that oversees state worker benefits and includes the governor, the attorney general and three state administrators, or their designees, plus six members appointed by the governor.
Current members include Michael Heifetz, state Medicaid director; Ted Neitzke, former superintendent of the West Bend School District; and J.P. Wieske, deputy insurance commissioner.
[Editor's note: This story has been updated to reflect that Group Health would be a provider under the state's proposed self-insurance program through Quartz.]