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Self-insuring state workers, instead of enrolling them in 18 health insurance plans, would save Wisconsin $42 million a year, according to a consultant’s report Tuesday saying the state should gradually make the shift.

Segal Consulting, hired by the state Department of Employee Trust Funds, told ETF’s Group Insurance Board that the switch would let the state avoid $18 million in Affordable Care Act fees, cut $11 million in administration costs and eliminate $11 million in insurance company profits, among other benefits.

The state would have to triple its cash reserves, however, to have enough money to pay claims, Segal said.

Health insurers should be required to collect data next year that would help the state move to self-insurance as early as 2018, Segal said.

The Wisconsin Association of Health Plans, which represents many of the health plans that insure some 250,000 public workers today, opposes self-insurance, saying it could limit competition, disrupt the state’s regional health care systems and reduce access for patients.

Rick Badger, executive director of AFSCME Council 32, said the state should involve workers in their talks about self-insurance.

“They’re considering blowing up the health care system for state employees without bothering to involve any front-line employees in the discussion,” Badger said in a statement. “Before making more changes that could wreak more havoc on the families of state employees, this administration should learn from its past mistakes and actually try listening to state employees for a change.”

Meanwhile, Segal said the state should consolidate the number of health plans covering public workers by using just one or two health plans in each of three regions, plus one statewide plan. That would involve no more than seven health plans instead of 18, saving $40 million to $70 million a year and making the transition to self-insurance easier, Segal said.

Most states use self-insurance for state workers, and “there does not appear to be a compelling reason for ETF to remain fully insured, the report said.

“It gives you more control over plan design,” Segal consultant Richard Ward told the insurance board. “I don’t think it would impact access. I think it could be done to minimize disruption.”

The insurance board, a governor-controlled group that oversees the $1.5 billion health benefit program for public workers, discussed the report Tuesday but isn’t scheduled to take action until February.

Members talked about having an additional meeting before February to address self-insurance and other issues.

“It’s important for this body to get these decisions right,” said Dan Schwartzer, the state’s deputy insurance commissioner and a member of the insurance board, who called for the extra meeting. “I just think we’re cutting way too short this discussion.”

Today, about 209,000 state workers and dependents, and roughly 40,000 local government workers and dependents, choose among health plans available in their areas.

Nearly 100,000 of the workers and dependents are in Dane County, where Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus and Unity compete for their business.

Under self-insurance, the state would pay benefits and assume the risk for claims, likely hiring one or more private insurance companies to administer the program. Such firms could be from out of state.

Previous consultant reports have presented a mixed picture of switching to self-insurance.

The move could save $20 million, partly by avoiding fees from the Affordable Care Act, but could cost $100 million, according to reports in 2012 and 2013 by the consulting firm Deloitte.

Segal said in a preliminary report this March that savings would be $50 million to $70 million.

In May, the insurance board — acting on recommendations from Segal — doubled out-of-pocket costs for medical services for state workers next year, though their insurance premiums are going down slightly. Those and other changes are expected to save $89 million next year.

The 11-member board includes the governor, the attorney general and three state administrators, or their designees, plus six members appointed by the governor.

Walker vetoed a budget measure this year that would have required the six appointees to be approved by the state Senate. The measure also would have expanded the board to 15 members, including two appointed by the Senate and two by the Assembly.

Under a bill approved by the Assembly on Monday, the Legislature’s Joint Finance Committee would have to approve any contract moving Wisconsin public workers into self-insurance.

Gov. Scott Walker had promised to veto an earlier, more expansive version of the bill, but his spokeswoman has said he’s likely to sign the one that passed, The Associated Press reported.

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Who pays for public employee health insurance

Gov. Scott Walker is considering changing Wisconsin's state employee insurance from a program in which 95 percent of workers are fully-insured to a program in which all workers would be self-insured.

Under a self-insured program, the state would no longer purchase health insurance. The state would pay claims directly and assume the risk. A commercial insurer likely would administer the program and contract with providers.