State Self-Insurance: Needlessly Risky and Less Competitive

by Protect Our Wisconsin Retirement Security (POWRS)

On Feb. 8th, the Group Insurance Board (GIB) announced that the State would create a self-insurance plan for public employees which could “save” $60 million over two years and deliver health insurance through “regionalization”. The 16-member, Joint Finance Committee (JFC) will approve or reject this plan, possibly in April. To understand what is at stake, we first need to look at the current group health plan.

Wisconsin has been a leader in the delivery of lower-cost, group health insurance. For nearly 30 years, Wisconsin has used a structure that encouraged the development of community-based, Health Maintenance Organizations (HMOs). Seventeen (17) HMOs presently compete head-to-head in different county configurations to deliver services, and this competition has often resulted in reduced costs, good doctor and plan choice, and generally satisfied customers. The current model has saved taxpayers $283 million over the past nine years.

Our current, highly competitive HMO model not only serves around 250,000 public employees, but these same HMOs serve thousands of non-state employees (citizens) too. Under the proposed self-insurance scheme, Wisconsin would be divided into four regions with one national health insurer, Anthem, allowed to compete in all regions, but only one or two local providers would be allowed to compete in each region.

Reducing competition is questionable enough, but adding the unknown effects of significant HMO marketplace disruption, (e.g. foreclosure, consolidation) raises the stakes even higher. The unintended consequences of changing the health insurance environment of thousands of citizens deserved close examination, yet it never happened. The Dept. of Employee Trust Funds (ETF) claimed it was “beyond the scope of their review”. The JFC cannot be allowed to make this claim . . . they represent all citizens!

As Wisconsin is seeking to reduce competition, Republicans at the federal level seem intent on increasing competition as they work to repeal and replace the Affordable Care Act (ACA). While the end result cannot be predicted, their words suggest a belief in expanding choice, not reducing it.

“Savings” was always given as a main motivator for change, and it is fair to ask “just how complicated did any change have to be to “save” $60 million?” . Turns out not much. In a January 24th memo, ETF said that “comparable savings” could have been achieved through six of its seven scenarios. Some of these scenarios would have kept the current, HMO system intact with little disruption.

In a Feb. 24th, Milwaukee Journal Sentinel story, “For Wisconsin, Market Competition is the Right Way”, Josephine Musser makes clear that the GIB is fixing something that isn’t broken. We agree. The current model is competitive and working. Self-insurance schemes are fraught with many risks and unknowns, (e.g. higher pay-outs and operating costs, more reserve fund needs) and it would be taxpayers and public employees who would be stuck bailing out a failing program. All citizens deserve a system that provides secure protection!


The current self-insurance proposal is poorly timed and risky, even allowing future administrations to play “fast and loose” with the premiums and benefits of public employees. There is every reason to believe that current HMO providers could have met the challenge of doing even better, but they were denied that chance by a Board intent on playing politics and not caring about the very citizens they are supposed to serve.

POWRS is an activist group of volunteers who work to protect the Wisconsin Retirement System (WRS) and seek retirement security for all. Follow us on Facebook at “POWRS”.