By Senator Howard Marklein
June 16, 2017
The Risk Is Not Worth the Reward
JFC Rejects Governor's Self-Insurance Proposal
The legislature’s Joint Finance Committee (JFC), on which I serve, rejected Governor Scott Walker’s plan to move all state employee health insurance to a self-insurance model. We decided that the risk associated with self-insurance was not worth the projected reward or potential savings.
In a self-insured group health plan, the employer assumes the financial risk for providing health care benefits to its employees. The employer pays for each out-of-pocket claim instead of paying a fixed premium to an insurance carrier for coverage under a negotiated plan.
Currently, and because of our decision, state employee health insurance will continue to pay health plans a monthly premium for coverage for state employees and their families. The structure of this program will change, but overall, most employees will continue to be covered the same way that they are now.
Health insurance premiums for the state have risen only 3.7% over the last 10 years. Compared to the private sector, this increase is nominal and relatively low. We spend approximately $1.2 billion per year in health insurance premiums to cover state employees and their families.
As we studied the idea of self-insurance, we recognized a number of factors that led to our decision. First and foremost, changing to self-insurance places 100% of the risk on our state. Measuring that against the estimated savings of less than 3% of the total cost of the program, my colleagues and I do not believe that the risk is worth the reward. Studies of the potential savings have been inconsistent and uncertain. I was not convinced that the savings would be worth causing a major disruption in health insurance for our employees statewide.
Self-insurance would disrupt a health insurance program that is working well. It would especially impact state employees in rural parts of our state where there are fewer providers and options for workers. State employees in Madison or Milwaukee may not see any changes, but a worker in Cassville or Elroy might have a much different experience.
With this decision, the JFC has directed the Group Insurance Board (GIB) to sharpen their pencils to find savings within our current health insurance program to make up the estimated “savings” the Governor included in his budget. We know there are changes that could be made such as increasing wellness initiatives, plan designs and more. In fact, through this action, we have given the GIB flexibility to add tiers of coverage to save money while giving employees more choices and options to manage their own health care coverage. The GIB was previously authorized to administer three tiers, but only offered two. We have increased their authorization to offer five different levels of coverage to employees and have encouraged them to add tiers.
The state health insurance program is a rich plan. We have above average utilization compared to private sector employers with similar demographics. Our health insurance program is a valuable fringe benefit for all state employees. A disruption in this benefit would not have been worth the questionable reward.
As your State Senator, I consider this decision to be a win-win for taxpayers and state employees. There is a net cost of zero for our action and I am optimistic that the GIB will be able to manage our resources responsibly as we move forward and create a system that offers state employees more options.
For more information and to connect with me, visit my website http://legis.wisconsin.gov/senate/17/marklein and subscribe to my weekly E-Update by sending an email to Sen.Marklein@legis.wisconsin.gov. Do not hesitate to call 800-978-8008 if you have input, ideas or need assistance with any state-related matters.