The Republican leaders of Wisconsin’;s budget-writing committee remain staunchly opposed to Gov. Scott Walker’;s plan to implement self-insurance for state employees, citing a new analysis by the nonpartisan Legislative Fiscal Bureau.
But while Joint Finance Committee co-chairs Sen. Alberta Darling, R-River Hills, and Rep. John Nygren, R-Marinette, say the memo bolsters their argument against the proposal and raises new concerns, Walker’;s administration says it proves the move would save the state money.
The LFB analysis, released Wednesday, projects the state would save about $47 million over the 2017-19 budget period by switching to self-insurance. That’;s about $13 million less than the estimate contained in Walker’;s budget proposal. The $47 million figure is a midpoint estimate in a range of $30 million to $64 million in savings.
“We just disagree with the governor that we’re foolish not to take the savings,” Darling told reporters, reaffirming the committee’;s plans reject the proposal.
Walker and his administration have made a strong push to convince legislators to approve the plan. The governor told reporters on Tuesday he doesn’;t know “why anyone would walk away from tens of millions of dollars of proven savings.”
Officials in Walker’;s administration held a press conference last week warning lawmakers they would need to find $103.4 million in budget savings to offset the impact of rejecting the self-insurance plan.
The governor’;s administration submitted self-insurance contracts to the Joint Finance Committee earlier this month that they say would save the state a guaranteed $60 million during the 2017-19 budget period.
But on Friday, they said the cost of rejecting the proposal would be larger than that due to $22 million in Affordable Care Act fees that would be avoided under self-insurance and $21.4 million in costs from health insurance premium increases. The administration has budgeted for 7 percent premium increases, but new projections put the hike closer to 10 percent without a switch to self-insurance, officials said.
The new LFB memo revises the estimated Affordable Care Act fee to $18 million. According to the analysis, health insurance premiums for state employees increased by an average of 3.7 percent per year over the last 9 years. Removing 2 potential outlier years would put the average increase at 5.3 percent per year.
“Governor Walker’s budget reforms government to make it more accountable to the taxpayers,” said Department of Administration Secretary Scott Neitzel in a statement. “While the LFB uses lower estimates, they conclude the savings from self-insurance are real and amount to tens of millions of dollars.”
A key point of contention in the dispute is the state’;s health insurance program reserves, which grew by $63 million last year. At the end of last year, program reserves exceeded the maximum recommended level by $18 million.
The state Group Insurance Board’;s consulting firm recommended those reserves not be tapped into in 2016 or 2017 in order to build a “solid starting reserve” as the state prepared to move to self-insurance.
But Nygren and Darling said they plan to request an audit of the state health plan.
“If they have all of this growth and these huge reserves, why didn’t they give the money back to the consumer?” Darling asked.
The lawmakers said they believe they can find a similar amount of savings to the $60 million initially projected in Walker’;s proposal by making changes to insurance plan designs.
Walker’;s budget directs that $60 million to fund a portion of a $649 million boost in per-pupil aid for K-12 education and a portion of pay and benefit increases for University of Wisconsin employees.
Under the self-insurance model, the state would contract with insurers and third-party administrators to pay for public employees’; medical bills directly rather than pay premiums to insurance companies.
The state would move from paying premiums to 18 HMOs across the state to contracting with 6 health insurance companies to administer the self-insurance program in 4 regions — north, south, east and west — statewide.
Self-insurance is the “best option to save the most taxpayer dollars, avoid an ObamaCare tax, and provide the least disruption to state employees,” according to a Department of Administration news release.
Department of Employee Trust Funds spokesman Mark Lamkins has said without the approval of self-insurance, the only way to reach the savings target would be to freeze insurer premiums or shift “significant costs” to state and local government employees.
“I believe that plan design change can save an equal amount of money to what the governor proposed and not even be short by $13 million,” Nygren said. “Take it to the bank.”