Making state employees pay more for insurance has hidden costs

As Others See It
Matt Pommer • Wisconsin Newspaper Association


A quick prescription being floated for part of the state’s financial woes: make state employees pay more for their health insurance. It could be great politics for the Republican-controlled government but it comes with warnings.

An Atlanta-based consulting firm says the state could save from $50 million to $70 million if it shifted to self-insurance with deductibles, significant out-ofpocket maximums, charging more for brand-name drugs and other changes.

Currently the state plan covers about 240,000 persons including workers, families and some retirees. Most are getting their coverage through health maintenance organizations (HMOs) that have broad benefits. A central goal of the HMOs has been to encourage care and treatment early in illnesses. Early care, it is argued, reduces overall medical costs.

The trade organization that represents the HMOs has challenged the estimate of savings from the consulting firm. It noted the fi- nancial risk for providing care would be shifted to state government rather than the HMOs, which now shoulder the annual profits or losses.

The Atlanta consultant said Wisconsin state government now pays more for employee health insurance than neighboring states, and by 2017 could face penalties under the federal Affordable Health Care Act with those levels of payment. One of the goals of the act, dubbed Obamacare, is to limit the costs of health care.

Many private employers have opted to provide health coverage for their workers through the same HMOs that contract with state government. Would the loss of state contracts have a major impact on the premiums for private employers?

Like most government programs, the devil would be in the details. How would medical care be impacted if ‘fee for service’ returned under self-insurance? Who would determine if too many tests or referrals to specialists were being employed? Clearly, the state government would want and need some watchdog if it, rather than the HMOs, was on the financial hook.

While it would have the ultimate responsibility to pay the bills, state government has often met red ink problems by delaying payments into the following fiscal year. Medical providers might have to wait for their payments.

Earlier this year, the Atlanta consultant proposed requiring a $250 annual deductible for single coverage and $500 for family coverage. It proposed out-of-pocket maximums at $1,000 for single coverage and $2,000 for family coverage.

Wisconsin went to the HMO concept in the 1980s when there were 25-30 percent increases in the then-predominant fee-for-service state health insurance costs. The changes were pioneered when Democrats held the governor’s chair and both houses of the Legislature. That history could inspire Republicans to dump the HMO concept.

There are lots of ‘ifs, ands and buts’ on health-care issues. The U.S. Supreme Court is expected to rule next month on a challenge that could undermine Obamacare and force Congress to make changes. Some Republican presidential hopefuls like Gov. Scott Walker have vowed to eliminate Obamacare when they get to the White House.

State governments may well have larger roles in medical care. Republicans in Congress have suggested state governments get block grants from the federal government to fashion their own Medicaid programs for care of the elderly, poor and disabled.

That may be a challenge for states like Wisconsin that have older-than-average populations. The 2010 Census showed Wisconsin’s average age was the 16th oldest in the nation.

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