Fiscal bureau: Self-insurance savings $13 million less than projected

May 31--Gov. Scott Walker's proposal to self-insure state employees would save $13 million less than previously thought, the Legislative Fiscal Bureau reported Wednesday.

The nonpartisan agency's report, which said the move would save $47 million over two years, not $60 million, dealt another blow to the proposal, which legislative Republicans have already rejected. Walker tried to revive the plan last week, saying workers would face 10 percent premium increases next year under the current group health insurance plan system.

The fiscal bureau also said the state's health insurance reserves last year were $18.4 million to $68.8 million more than allowed under a 2011 policy. The $144.4 million in reserves equaled 28.6 percent of claims, above the thresholds of 15 percent to 25 percent.

The Republican leaders of the Joint Finance Committee highlighted the findings Wednesday as reasons for why they are rejecting the governor's self-insurance plan. They called for a legislative audit of the state worker health insurance program.

"If they have all this growth, why didn't they give the money back to the consumer?" said Sen. Alberta Darling, R-River Hills. "They kept the money themselves. We're concerned about that."

Mark Lamkins, spokesman for the state Department of Employee Trust Funds, said the Group Insurance Board didn't withdraw reserves last year because the state negotiated low premium increases for this year and was preparing to begin self-insurance in 2018.

Under self-insurance, which is used by many large employers, the state would take on the risk for medical claims for 250,000 state and local government workers, and family members, instead of paying premiums to 17 HMOs, which currently accept the risk.

Many of the HMOs, including Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus and Unity Health Insurance in Dane County, are owned by regional health care systems around the state. Some could lose business under the proposal.

Walker spokesman Tom Evenson said moving to self-insurance remains the best option to save the most taxpayer dollars. "It's unfortunate the Legislature will not embrace a reform that would save, by all accounts, tens of millions of dollars," Evenson said.

Department of Administration Secretary Scott Neitzel said last week that self-insurance would save $103 million in the upcoming two-year budget. The state's consultant, Segal, defended its estimate of about $60 million.

The fiscal bureau put the figure at $47 million over two years, a reduction due in part to lesser savings from avoiding an Affordable Care Act fee.

A previous consultant hired by the state said the move could save $20 million a year or cost up to $100 million.

The fiscal bureau noted that state worker premiums have gone up an average of 3.7 percent a year over the past nine years. Segal said the increase would need to be 10.4 percent next year without shifting to self-insurance.

But Phil Dougherty, senior executive officer for the Wisconsin Association of Health Plans, which opposes self-insurance, said the projection is based on the state's assumptions and not health plan bids, which aren't due until June 30.

"The only way the state can be certain of its costs -- or savings -- is to fix its payments with a fully insured benefit program," Dougherty said.

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