Self-insurance is OUT, leaving Walker Admin with a major sad

Well, looks like another Scott Walker scheme to balance the budget on hopes and prayers is going down the tubes.

The Republican leaders of the Legislature's budget-writing committee plan to reject self-insurance contracts submitted by Gov. Scott Walker's administration this week, they said Tuesday.

"I think there’s not convincing evidence that we need to do that right now," Joint Finance Committee co-chair Sen. Alberta Darling, R-River Hills, told reporters….

Joint Finance co-chair Rep. John Nygren, R-Marinette, said lawmakers on the committee will either come up with a plan to find $60 million for education funding in another area of the budget or they will direct the Department of Employee Trust Funds to find a similar amount of savings within the existing system.

Nygren said he looked through the contracts on Monday and found "no there, there" to explain how the projected savings were found.

No surprise here, not only because the Walker Administration’s reasoning for larger savings through self-insurance basically amounted to “Trust us, it’ll work.” With the fate of the Affordable Care Act and related health-care legislation up in the air in Congress, it kind of seems silly to try to push through a new plan without knowing how health care would or would not change in the future. There's also the point to be made that several regional providers would be endangered under a self-insurance model, and the loss of revenue and jobs that were being risked under a self-insurance model was probably a big reason behind the bipartisan opposition to the self-insurance plan.

But that didn't stop the Walker Administration from complaining about the JFC Republicans turning down the self-insurance plan. DOA Secretary Scott Neitzel said that the savings were locked in due to contracts that had already been agreed to.

Neitzel said the argument is simple: the contracts cost the state $60 million less over the 2017-19 biennium than the current plan would.

"It’s not a 'hope for' number, it’s not a projection, it’s a contract," Neitzel said. "And that contract saves state taxpayers at least $60 million over the next two years, and causes almost no disruption for our employees, and does not increase the cost for our employees. There is a lot there, and that 'a lot' is savings for taxpayers in the tens of millions of dollars."

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.

Of course, Neitzel can't say what would happen after 2 years of real-life experience under that contract, and whether that would lead to a massive jacking of rates, changes in services and/or departures from the state insurance system. It's very much like using one-time Act 10 savings on tax cuts, and then having the state budget implode once that one-time tool has been used up.

In that article, Neitzel did correctly reference this now leaves the state budget up against the wall, as Walker had built in the $60 million of savings as the way to pay for some of his initiatives in the budget (as this Fiscal Bureau memo had pointed out in March). This included $30 million of Walker’s proposed increase to K-12 funding, and another $29.55 million that is needed to fund a proposed wage increase at the UW. There is another pot of money that now has to be accounted for, in case one particular part of Obamacare stays around.

Health Insurer Fee Savings. Under the bill, savings associated with the anticipated repeal of the federal Affordable Care Act's health insurer fee (otherwise known as a market share fee or premium tax) are accounted for separately from a decision to self-insure for group health plans. Compensation reserves for state employees other than UW System employees assume expenditure reductions of $4,082,700 GPR in 2017-18 and $8,165,300 GPR in 2018-19 associated with eliminating the fee. The amount appropriated to the UW System for compensation, described above, assumes expenditure reductions of $3,247,000 GPR in 2017-18 and $6,494,100 GPR in 2018-19 associated with eliminating the fee.

So while you may view it as a good thing that JFC members are not willing to allow Walker’s self-insurance scheme to become law, there’s now a significant budget hole that has to be filled. And unless we get a major upside surprise for revenue estimates later this week, there are other Walker tax cuts and pre-election giveaways that are going to have to be tossed out of this budget in order to make the numbers add up. And that's probably why Scott Walker and his administration liked this scheme so much- it would give one-time savings before the 2018 election, and then lead a massive budget crunch soon after the 2018 elections, at which time Walker would parachute out and leave the problem to who was left in the Legislature.

Today’s announcement also doesn’t keep state employees from seeing changes to their 2018 health care plan. In the WisPolitics summary of today’s press meeting (subscription required), Nygren says that there are two sources that he may look to tap to make up the savings baked into Walker’s budget.

Co-chair John Nygren, R-Marinette, said the committee would instead look to match the $60 million in savings Walker had projected through the move. That could be accomplished, for example, by increasing co-pays and deductibles under the current structure.

Nygren also said he’s heard there is a surplus at the Department of Employee Trust Funds of $60 million to $80 million that he’d like to know more about.

File this under “to be continued”, and let’s not break out the party hats quite yet. Even though the biggest bullet and threat to the health care cost budget (Walker’s self-insurance scheme) has been dodged, it’s clear that several decisions and discussions still have yet to be made about state employee health insurance over the coming weeks.