• watch your step

By Kathleen Marsh of POWRS

The 2017-2019 Wisconsin state budget planning is well underway. Facing a huge financial hole due to ill-advised tax policy, Governor Walker is looking for ways to balance the budget, as is required by state law. One program he is targeting is the State Health Insurance Program which covers over 260,000 public employees. Walker’s idea?  Self-insurance. Critics wonder if blowing up the current system for a roll-of-the-dice on self-insurance makes sense. Let’s look at the facts:

The Governor has talked about moving to self-insurance for many months. He hired a consultant, Deloitte, to evaluate the proposal. A highly respected firm, Deloitte found that self-insurance could save Wisconsin $20 million, or it could generate $100 million in losses.  Evidently, this was the wrong answer. The Walker Administration and Group Insurance Board (GIB) hired a second company: Segal Consulting. Using different, some say fuzzy math, Segal suggested a savings of $40 million dollars.

Thus, since summer 2016, the GIB and Walker Administration have quietly worked toward a self-insurance plan to be part of the next budget. When health insurers and providers were notified about the prospective changes, they became very nervous.  Why? Wisconsin has a uniquely local provider system based on 17 HMOs (Health Maintenance Organizations) competing for public employees across all 72 counties. This county competition underpins the current HMO system and has worked amazingly well. In fact, it put Wisconsin on the map for efficient, low-cost, health care. Recently, it has received high praise because it kept the average annual rate increase for 2017 to an astonishingly low 1.6%!

On Monday, November 14th, fourteen (14) heath care organizations led by the Wisconsin Hospital Association and Wisconsin Medical Society sent a letter to Gov. Walker, the GIB, and the Legislature’s Joint Finance Committee (JFC). The letter makes very clear that changing to self-insurance is risky and could affect the entire health delivery system in Wisconsin.  In short, it urges the state to slow-down and do a thorough, apples-to-apples, comparison of self-insurance to the current Health Maintenance Organization (HMO) -based system.  

Governor Walker’s proposal takes Wisconsin down a precarious path.  It calls for reducing competition by creating four regions (not counties), allowing just two local HMO networks per region, and bringing in one or two national insurers (Blue Cross/Blue Shield, Humana, etc.) who currently have a very small presence in the state. Past experience says that reducing competition increases rather than reduces health care costs, which is exactly what happened when Wisconsin tried self-insurance in the 1980s, a massive failure that created the current system which has proved so successful.

But, you say, I am not a public employee so why should I care?  Because these changes will also affect private sector workers and retirees. Smaller HMOs will either be forced out of business or forced to merge, reducing competition further, laying off staff, and otherwise forcing tens of thousands of people to find new doctors and providers, especially in counties currently served by many HMO plan networks, (e.g. Manitowoc, Rock, Outagamie, Eau Claire).

Wisconsin is a national leader in lower cost, quality health insurance for its public employees. That never mattered to Governor Walker. Instead, public employees will likely experience what happened in Milwaukee County when that municipality switched to self-insurance: frequent annual rate increases beyond 10% and reduced benefits. Is this going to attract or keep highly skilled public employees who have already seen devastating cuts in their take home pay due to Act 10?

Worst of all, Scott Walker’s proposed wholesale changes mean that not only will thousands of Wisconsinites be at the mercy of higher health costs, but they will pay higher taxes as well. Under a self-insurance delivery system, the state must retain a financial reserve of tens of millions for unexpected costs (high medical pay-outs). This pool of money will come from only one place: the taxpayer’s pocket. We must also not forget that state self-insurance administration is not free. Expect to add on a 9% charge by a private sector company.  If there are any so-called “savings”, those are likely to be a one-time, first year event only.

Health care systems are very complicated. Pull it here and something moves over there.  There is no evidence that the Walker Administration has spent sufficient time thoroughly vetting self-insurance from every angle . . .not just the angle of saving money. There have been no hearings or public meetings held on a scheme that could cost public employees, citizens, and taxpayers millions of dollars, not to mention endanger their health care benefits.  At this time, it is strictly an “insider’s game” at best.

POWRS (Protect Our Wisconsin Retirement Security) is asking every citizen to contact his/her legislator and the Joint Finance Committee (JFC) members to demand that the proposed scheme be slowed until a thorough, comprehensive analysis has been conducted and made available to the public.  The “savings” we see from this scheme might last one budget cycle, but the extra costs and reduced benefits could go on forever!  We should bear in mind that self-insurance was a plan that didn’t work in the 1980s. Why does Scott Walker think it will work now?