The state’s health care program for public employees could face changes, pending the results of a study conducted by an Atlanta-based consultant.
Gov. Scott Walker’s administration has contracted with the Segal Co. to study potential cost-cutting changes to the state’s health insurance plans, including moving to a self-insured coverage program, the Milwaukee Journal Sentinel reported Wednesday.
That news came the same day the conservative MacIver Institute and National Center for Policy Analysis presented a report calling for changes to the state’s health care benefit program for public retirees, based on the strengths of the state’s pension fund.
The think tanks offered recommendations for both the pension system and the state’s post-employment health benefit program. Their health coverage recommendations included higher premiums for retirees, closing the current program to future employees and those below age 45 and shifting those employees to a pre-funded plan, particularly one with a health savings account.
Asked about the MacIver and NCPA suggestions, Walker spokeswoman Laurel Patrick said in an email that the governor’s priority is to continue to provide high-quality benefits at a good value to both current and retired state employees.
“According to PEW, Wisconsin is the only state in the nation with a fully funded pension system and the only state rated a solid performer in both pension and OPEB liabilities that include retiree health insurance,” Patrick said. “Governor Walker will continue to look at ways to control costs and provide quality care.”
The Segal study will explore several potential changes with the goal of saving taxpayers money on health coverage for state employees. One such change — a shift away from private health maintenance organizations — was floated by Walker last year, but no decision was reached.
Under the current model, state employees choose between private HMOs, which forces competition in the marketplace. Under a self-insured model, the state would pay benefits directly and assume the risk for losses rather than paying premiums to HMOs.
The study will take a broader focus than assessing the move to self-insurance, unlike two previous studies conducted by the consulting firm Deloitte.
According to the Deloitte studies, completed in 2012 and 2013, moving to self-insurance could save Wisconsin $20 million — but could cost $100 million more.
The estimated savings are attributed to avoiding fees under the Affordable Care Act.
Wisconsin has operated under the competitive HMO model for 30 years. The state dropped a self-insurance program after experiencing major spikes in costs in the early 1980s, the Journal Sentinel reported.
Marty Beil, executive director of the Wisconsin State Employees Union, said the union hasn’t heard anything specific about proposed changes. But a coalition of groups representing public employees was formed several years ago in an effort to preemptively ward off changes to the state’s public employee retirement benefits. That coalition includes WSEU, the Wisconsin Education Association Council, the American Federation of State, County and Municipal Employees, the Service Employees International Union and the American Federation of Teachers.
WSEU and other groups representing state employees are not warm to the idea of a self-insurance model.
“I don’t understand why or really see the benefit, except they have more control over workers,” Beil said. “It certainly won’t hold the price of health care in the same place that these HMOs competitively held it.”
Beil praised the state’s existing system and said it has been the “driving force” in creating a competitive healthcare marketplace in Wisconsin. He questioned why lawmakers “would want to tinker” with that.
NCPA senior fellow John Graham said during Wednesday’s briefing that the organization believes funding assumptions in the state’s health insurance program are unrealistic, based on rosy projections of health care cost increases. The health plan does not enjoy the same features and stability of the pension system, Graham said, advocating for a pre-funded plan.
Asked whether the studies would recommend eliminating sick-leave conversion — a policy under which retired state employees can convert unused sick time to payment for health insurance — Graham said they “did not address that.”
Graham said moving to health savings accounts can be a “point of resistance” because unions often hold ideological oppositions to them.
“Once it gets done and the actual employee or retiree sees they’re controlling more of their health care dollars, they accept it and they find it empowering,” Graham said.
Beil said he thinks the MacIver Institute is trying to “stir the pot” by suggesting adjustments to the state’s health care program and its pension fund.
The Wisconsin Retirement System has for years received plaudits for its stability, considered one of the healthiest in the nation. It has maintained a near 100-percent funded level since 2000, and been deemed the strongest state pension system in the nation by both the Pew Center for the States and the investment research firm Morningstar Inc.
The MacIver and NCPA recommendations echoed that praise, but said the system could be improved by raising the retirement age and using two discount rates for current employees and retirees.
Beil said he believes the conversation is designed to create momentum for a movement to create a 401(k)-style alternative to the pension system.
MacIver Institute communications director Nick Novak said the reports released by the think tanks are not legislative proposals.
“We simply identified problems facing Wisconsin’s Long-Term Care services and retiree pension and health care benefits and have outlined why they are problems,” Novak said in an email. “The experts at NCPA also outlined possible solutions to address these challenges. Our goal is to educate the public about these and many other important policy issues facing our state.”