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JFC Members Question Self-Funded Insurance Plan; Senator Olsen Praises Walker’s K-12 Funding Increases
By Wisconsin School Administrators Alliance staff | March 29, 2017
What follows comes from WisPolitics coverage of the Department of Administration’s agency briefing on the Governor’s budget bill before the Joint Finance Committee. As you can see there was a lot of discussion of the proposed state switch to a self-funded health insurance model and earmarking the projected savings from such a move to K-12 funding. Also check out Senator Luther Olsen’s comments in support of the Governor’s proposed increases in K-12 funding.
From WisPolitics.com …
DOA Secretary Scott Neitzel today defended the guv’s call to move state employees to a self-insurance model as Joint Finance Committee members raised concerns the projected savings will not materialize.
Neitzel, who was first to testify before the committee as three days of agency briefings kick off, acknowledged some state employees may have to switch providers if the self-insurance approach is approved.
Still, he said any disruptions would be minimal. Neitzel also defended the savings projections, saying they’re based on requests for proposal that had been sent out. Those, he said, are more reliable than past studies that had found the state could save money under self-insurance, but there also was a risk costs could go up.
The guv’s budget calls for taking the expected $60 million in savings and pouring it into K-12 funding, along with raises for state and UW employees.
Rep. Mary Felzkowski, R-Irma, questioned if the approach was such a good approach, why it wasn’t allowed to “stand on its own merit” rather than tying up the savings.
“I feel like you’re backing us into a corner on self funding,” she said.
DOA Budget Director Waylon Hurlburt noted Gov. Scott Walker said well in advance of releasing his budget that he wanted to look at moving to a self-insurance model and that every dollar in savings on state spending that could be found should go into K-12 aid.
“That’s what he said, and that’s why it’s linked to K-12 education,” Hurlburt said.
Rep. Katrina Shankland, D-Stevens Point, also pressed Neitzel on his pledge the anticipated savings would not come from a reduction in benefits, asking him to guarantee that would not happen in the next budget as well. But Neitzel said, “Every budget stands on its own.”
Today’s agency briefing provided a glimpse of the concerns JFC members have on the guv’s budget that could lead to changes as the committee begins to vote on the proposal, likely in May. Beyond self-insurance, GOP committee members raised concerns about Walker’s plan to consolidate services like human resources at DOA as well as the approach to transportation.
Sen. Luther Olsen, R-Ripon, praised the guv’s call to pump an additional $649 million into K-12 funding.
The lawmaker said he previously didn’t want a public hearing on the budget because he wasn’t thrilled with various pieces of it. This year, however, the committee will visit his district, and he thanked Neitzel for the boost to K-12 the guv is proposing.
Still, he questioned the decision to require districts to be Act 10 compliant in order to receive the funding. The guv’s office has said the intent is to make sure school employees are paying 12 percent of their health care costs to ensure they’re taking advantage of the tools provided under Act 10 before they get the additional money.
Olsen, though, pointed out some districts have taken a different approach to health insurance for their employees, including higher deductibles and co-pays, resulting in greater savings than if they simply took their existing plans and required employees to pick up 12 percent.
“Are we sort of getting our nose in their business on how they manage their staff when they have used the tools that we gave them?” Olsen asked.
Hurlburt said the guv wanted the requirement as part of an effort to ensure the additional aid ended up in the classroom, not overhead. He said the administration was open to tweaking the language to take into account things like co-pays and deductibles in making sure districts are Act 10 compliant.
“If you want to benefit from the reform divided, you need to have participated in reform,” Hurlburt said.
Co-chair John Nygren, R-Marinette, pointed to a memo from the Legislative Fiscal Bureau noting Act 10 related to those who covered employees through the Group Insurance Board. Only six districts currently do so.
Hurlburt again said the intent was to make sure school district employees are covering 12 percent of their health insurance costs, including out-of-pocket expenses.
Lawmakers on both sides said they have deep reservations on Walker’s self-insurance proposal, questioning Department of Employee Trust Funds officials on whether the agency’s savings estimates will pan out.
Sen. Leah Vukmir, R-Brookfield, noted a consultant had estimated that the state could lose $100 million in switching to self-insurance. Walker’s administration is projecting the state would save $60 million over the next biennium.
“I’m not a gambling gal, but those sound like pretty bad odds to me,” Vukmir said.
But ETF officials said that was an early high-level analysis on self-insurance — evaluating a much different program structure than what Walker’s proposing. That consultant also recommended ETF gather more data to get specific pricing information from health insurers, they noted.
Lisa Ellinger, ETF’s Office of Strategic Health Policy director, said she was a major skeptic of self-insurance early on. But now that the agency has gathered and analyzed the data, she said, she’s confident it’ll lead to significant savings in the next biennium and going forward.
“I’ve become a convert to thinking this is the right path for our program,” said
Still, lawmakers of both parties questioned whether lawmakers have enough information, whether the $60 million in savings is worth the risk, whether there will be major disruptions for employees and if there’s other ways for ETF to save money, among other things.
They also raised concerns on how the move would affect the state’s broader marketplace, including whether health insurers who’d lose customers under the proposal could cut jobs.
“You don’t have to consider the impact on the private market, but we do,” Hintz said.
Darling and Nygren, the JFC co-chairs, suggested the state can make a wide range of other improvements to find savings. Darling also said the state’s already doing a good job at limiting premium increases under its current program.
Felzkowski noted other states who self-insure their employees have had to backfill millions of dollars because their actuaries’ projections ended up being wrong.
“If this goes south, where is that money coming from?” she asked.
Olsen raised concerns that ETF is dramatically reducing the amount of vendors it works with and cutting out competitors from the current program.
“In Wisconsin, we’re saying fewer is better and cheaper,” he said. “I”m having trouble understanding.”
But Ellinger said the state is choosing to work with its highest quality insurers with the biggest discounts.
“I don’t think all choice is good choice,” she said.
As for other improvements the state can make, Ellinger said those are easier under a self-insured structure, which she said would boost the state’s data analytics and wellness programs.
“As we dug in and learned more about self-insurance we realized that many of the things we would like to do to improve health outcomes and drive quality and value through the program, were ideally suited to a self-insured environment,” ETF Secretary Robert Conlin said.
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