By TODD RICHMOND
MADISON, Wis. (AP) — The state could save more than $40 million annually by moving to a self-insurance model to cover public workers’ health care costs, according to a report that a consulting firm handed to the state insurance board Tuesday.
Under a self-insurance model, the state would pay for benefits directly and assume the risk of cost overruns rather than purchasing insurance from 17 HMOs. The report sets the stage for a possible board vote in February on moving to such a model, a move that could reverberate across Wisconsin’s health insurance markets.
According to Segal Consulting’s report, moving to self-insurance would eliminate the need to pay fees that the Affordable Care Act levied on health insurance issuers. The fees don’t apply to self-insurance plans; if the state self-insured it could save $18 million annually in fees, according to the report.
The move also would eliminate premium taxes levied by providers who participate in the state’s program but are based in other states. And self-insurance would reduce administrative costs and improve cash flow since the state would pay claims as needed rather than pre-pay for coverage on a monthly premium basis, the report said.
The state also would have complete flexibility in designing coverage plans and contracts with provider networks, the report said. That could help the state reduce its exposure to an excise tax that the federal health care law will impose on high-cost, employer-sponsored health care coverage beginning in 2018.
Most other states have turned to a self-insurance model, the report noted.
All told, shifting to a self-insurance model would save the state about $42.1 million per year, the report said. Segal reported to the board in March that the move could result in potential savings of $50 million to $70 million annually, though Tuesday’s report noted that was a preliminary estimate.
The report also recommended a host of other changes that coupled with self-insurance could save the state between $85 million and $120 million annually, including consolidating coverage regions; using generic drugs; giving employees financial incentives to visit top providers, resulting in more efficient care; and promoting wellness through health assessments and lifestyle coaching.
The insurance board’s chairman, Jon Litscher, said the board could take the first steps toward implementing the recommendations at its February meeting.
The state’s current Group Health Insurance Program covers about 250,000 active and retired state and local public employees and spouses. It makes up 14 percent of the entire commercial health insurance market, according to the Wisconsin Association of Health Plans, which represents 12 plans available through the current program.
Legislators have been wary of what a self-insurance model would do to rest of the state’s insurance market since the current program covers so many people. Gov. Scott Walker is expected to sign a bill that would give the Legislature’s finance committee oversight of any contracts implementing self-insurance.
Rep. John Nygren, one of that committee’s co-chairs, said he was still reading the report Tuesday but wasn’t surprised by its money-saving findings. But the bigger question, the Marinette Republican said, remains how self-insurance will affect people who aren’t public workers. After Walker signs the oversight bill, the committee will work with the nonpartisan Legislative Fiscal Bureau to get a better idea of possible impacts, he said.