State worker health benefits program has large reserves, audit finds

Feb. 16--The agency that handles state worker benefits doesn't consistently provide enough information to insurers and its oversight board, and had $142 million more in reserves than expected at the end of 2017, according to an audit released Friday.

But most customers of the state Department of Employee Trust Funds are satisfied with its services, and the agency has taken steps to improve its running of the program, said a report by the Legislative Audit Bureau.

State worker benefits -- chiefly, a $1.6 billion health insurance program with 263,000 participants, 102,000 of whom are in Dane County -- were in the spotlight in recent years after former Gov. Scott Walker proposed shifting to self-insurance.

Under self-insurance, the state would accept the risk for large medical claims instead of paying premiums primarily to provider-owned regional insurance companies. The plan, common among large employers but opposed by local insurers and many state employees, was rejected by the Legislature's budget committee, which ordered the audit.

The audit provides the first glimpse at how much the state spent studying self-insurance and other health benefit changes in recent years. In 2015-2017, the state paid Segal Consulting at least $887,000, the report said. Payments to Deloitte Consulting in earlier years were not quantified.

According to the audit, ETF did not determine the extent to which insurance companies achieved performance goals outlined in contracts or explain how much it could have assessed financial penalties when firms did not achieve the goals.

ETF didn't consistently provide the 11-member Group Insurance Board with written analyses of recommendations from consultants, the audit found.

Health insurance program reserves increased from $90.6 million in 2015 to $225.5 million in 2017, or by $134.9 million, including a fraction from participating local governments. State reserves as of December 2017 were $206.6 million, $142.4 million more than the midpoint of target ranges set by the insurance board.

The insurance board didn't spend any reserves in 2016 and 2017 because it was considering the move to self-insurance.

The Legislature should consider requiring ETF to provide annual information about reserves, the audit said.

Among other state agencies surveyed, 95 percent or more said they were satisfied with the open enrollment process and information and assistance provided by ETF. Among local governments in the state worker program, 98 percent said they were satisfied overall.

ETF Secretary Robert Conlin said he was pleased the audit identified no significant concerns.

"There are several good recommendations in the report, many of which we will implement, have implemented or are in the process of implementing," Conlin said.

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