Industry Concerned About Wisconsin’s Plan to Self-Insure

Wisconsin insurance industry leaders are worried a potential state move toward self-insurance is already on its way to a done deal.

At a Wisconsin Health News panel, panelists and audience members critiqued the possible change, which would reshape health insurance for nearly 250,000 state workers, retirees and family members and could weaken competition across the state’s insurance market. Under a self-insurance model, the state would pay for benefits directly instead of purchasing insurance from 17 HMOs.

State officials at the panel emphasized the coming months will provide more detail and guidance on whether the state should switch over, but some in the industry think it’s a foregone conclusion.

“I think there are a number of ways that things have been phrased and said that would give the perception that it’s further down the road than a lot of people want to believe,” said Group Health Cooperative of Eau Claire CEO Pete Farrow, a panelist at the event.

Republican Gov. Scott Walker highlighted the possible switch to a self-insurance plan in his State of the State address this year, pointing to the potential savings as a way to fund education initiatives.

State consultants have estimated the financial impact could range anywhere from $42 million in savings each year to $100 million more in costs per year. State officials hope to get a better picture from a request for proposals the Group Insurance Board authorized in February.

State Deputy Insurance Commissioner J.P. Wieske repeatedly said the state needs to see where that process goes before drawing conclusions about how the move would impact Wisconsin’s health insurance market or consumers.

“I don’t necessarily think the sky is falling, as I keep hearing here,” Wieske said.

The state’s Group Health Insurance Program makes up 14 percent of the entire commercial health insurance market, according to the Wisconsin Association of Health Plans, which opposes the plan and represents Group Health Cooperative and other HMOs. A move to a self-insurance model would mean those HMOs would lose state business.

Farrow raised concerns that the process won’t thoroughly assess the options and would weaken competition. A 2011 Kaiser Family Foundation analysis found Wisconsin had the most competitive health insurance market in the country for individuals and families.

“Wisconsin is totally like any other state from a health insurance perspective,” Farrow said.

The average annual cost increase for the program over the past five years has been 2.5 percent, compared to 5 to 7 percent nationally, said Lisa Ellinger, Director of the Office of Strategic Health Policy at the Department of Employee Trust Funds.

Ellinger said the department has been discussing the self-insurance concept since at least 2012. Nationally, 46 states partially or total self-insure, according to a memo she sent to the Group Insurance Board.

“Since our program is financed by the taxpayers, we also have a responsibility to explore and evaluate whether alternatives to our current structure are more cost effective,” Ellinger said.

She said the request for proposals is the best way to get more information on a host of possible changes to the program. The department plans to put out a full draft of the request this week so stakeholders can provide input. It will solicit full responses by September.

Legislators have expressed reservations about the move, questioning what it would do to the rest of the state’s insurance market. Walker signed a bill in December giving the Legislature’s budget committee oversight of any contract moving public workers to the new system.

Topics Market Wisconsin