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Department of Employee Trust Funds
February 17, 2016

Group Insurance Board Approves Exploring Self-Insurance,
No New Benefit Changes for 2017

ETF will further explore the impact of self-insurance for medical benefits in 2018, as directed by the Group Insurance Board today. The board also approved moving forward with several Request for Proposals (RFP) this year and ETF’s recommendation for no new benefit changes, except for a wellness benefit carve-out, for 2017.

The GIB directed ETF to develop an RFP for self-insurance, to be released in July. Based on the RFP findings, the GIB will decide this fall on whether to convert the state’s health insurance program to self-insurance and change the overall program structure. A regionalized, self-insured structure could save up to $70 million in medical claims, according to the board’s health care benefits consultant, Segal Consulting (Segal).

In addition, ETF was directed to develop and release three other related RFPs to contract with a data warehousing vendor, a wellness benefits administrator, and a pharmacy benefits manager. These efforts are a part of a total health management initiative proposed by Segal.

Segal estimated that the state’s health insurance program had $267 million in unnecessary and avoidable medical costs. In Segal’s report to the GIB last November, 64 percent of members had a chronic condition (e.g., diabetes, asthma, heart disease), which represents 90 percent of claims.

Implementing value-based incentives to motivate members to engage in medical management and wellness programs could eliminate up to $80 million in annual costs, according to Segal.

“The Group Insurance Board is committed to providing access to health care and improving care quality and outcomes for members,” said Jon Litscher, GIB chair. “With rising health care costs, the board also needs to be focused on cost management.”

Self-insurance has been adopted in 46 states for employee health insurance coverage. Self-insuring is the mechanism for paying for medical claims, and assuming the associated risk. The State of Wisconsin currently self-insures pharmacy, dental and a small portion of health insurance coverage.

Segal identified several advantages of self-insurance, including overall cost savings, a greater ability to collect data and make data-driven decisions related to the program, and to create a custom provider network. According to Segal, there is approximately $42.1 million in savings a year from the elimination of most premium tax and future Affordable Care Act and Excise Tax (“Cadillac Tax”) fees, and decreased administrative costs, among other savings.

Next Steps
Issuing an RFP is the next step in determining whether to self-insure the state’s group health insurance program. This includes collecting information to evaluate the administrative costs, breadth of provider networks, and different scenarios for regional and/or statewide program structures. ETF will present an overview of the requirements to be included in the RFP at the GIB’s May meeting.

After the proposals are evaluated this fall, the GIB will decide whether to move to a self-insured and/or regional model in 2018. Any self-insurance contracts with TPAs must be sent to the Joint Committee on Finance (JCF) for review, as required by 2015 Act 119. The JCF has the authority to deny the contract(s) or take no action, with the latter option allowing the process to continue.

More than 250,000 state and local government employees and retirees, University of Wisconsin employees, and their dependents participate in the State of Wisconsin’s health insurance program. The fully-insured program consists of 17 insurers. There is also a self-insured, PPO-based option administered by WPS.

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