Self-insurance board members question whether current system keeps cost down

Several state Group Insurance Board members with Walker administration posts today questioned whether the state’s current health insurance program for state employees works well.

The GIB is meeting today to continue its ongoing deliberations on whether the state should scrap the current system and instead self-insure its employees. A decision won’t come until at least next month.

At the meeting today, several members raised concerns about the state’s current system, noting the state doesn’t have control over health data and pushing back against the notion that the state’s competitive marketplace has kept costs low.

“I’m wondering if we are receiving diminishing returns from that process, and if it needs some adjustment to maximize our efficiencies and our benefits to our consumers and members,” said Michael Heifetz, the state Medicaid director. “I’m not accepting this premise that there is absolute 18 member-wide competition as they approach us as a board.”

The savings, he added, are often calculated using the insurers’ starting point in the negotiations.

“It’s pretty self-serving for someone to give us a number and then lower it and tell us how much they saved,” Heifetz said. “Without the right data, I don’t know if those initial bids are great numbers or not.”

A coalition of health care groups this month sent a memo to Gov. Scott Walker cautioning him against the move and urging him to fully examine its impact. The current program, they wrote, is “built on choice and competition” and therefore leads to lower costs for its members, better care and wider options of providers and health plans.

And getting rid of it, they warned, would harm the state’s competitive marketplace and have broader impacts in the marketplace.

“The potential repercussions for the state, for taxpayers, for state employees, for Wisconsin health care organizations, and for the Wisconsin economy are significant and could be far-reaching,” the memo read.

At the meeting today, J.P. Wieske, deputy commissioner at the Office of Commissioner of Insurance, noted the state employee plan costs are generally higher than those on the exchanges.

“Our medical costs are higher. That’s clear across the state. I don’t think there’s any question of that,” Wieske said.

These higher rates for state employees can be partially attributed to members being insulated to the differences between carriers, said UW-Eau Claire professor Herschel Day, a GIB member.

“The members see what is going to come out of their check, and for Tier 1 that’s the same deduction regardless of which carrier you go with, even though the carriers themselves do charge different rates to be Tier 1 carriers,” Day said. “I think some analysis on further transparency could assist us.”

Heifetz also said without proper access to data, any “decision we make isn’t well-founded.”

“We need data to know if we are getting the best deal and the best quality,” he said. “For us not to have that control and for us to rely on the vendors puts us at a disadvantage.”

The GIB is not expected to vote on the issue until its Dec. 13 follow-up meeting. If it approves the move to self-insurance, the Legislature’s Joint Finance Committee would get to sign off on the change.

See an earlier story on the self-insurance debate:

— By Alex Moe,