State News

State insurance plan may come up short on cash

Part of Gov. Scott Walker’s biennial budget is a proposal to move public employees to a self-insured model in hopes of raising $60 million from taxpayers to fund an investment in K-12 education.

Image By: Amileah Sutliff and Amileah Sutliff

To save state money and generate an estimated $60 million in revenue to successfully fulfill his K-12 funding plan, Gov. Scott Walker proposed to shift the way Wisconsin insures its public workers.

Currently, state employees, like UW-Madison faculty and staff, could choose from a range of plans in the Madison health-care market and the cost would be covered by their employer—the state of Wisconsin.

Under the new self-insurance proposal, instead of contracting out to different companies for coverage, the state would serve as the insurer and cover the cost itself.

Proponents of this change say that creating a large pool of employees makes it easier to share insurance costs. This means if use goes down, or the state is able to get better bargains, the state saves money. But it also means Wisconsin faces the risk if costs are higher, according to UW-Madison economics professor Barbara Wolfe.

But others say self-insurance is too risky. Before the proposal was added to the budget, two separate audits were done to predict the financial impact this would have—one suggested it could save the state millions, the other it could cost the state much more.

“I think it's fair to say this is one of those things in the budget that the governor just kind of throws into the budget much like spaghetti on a wall to see if it sticks,” said Sen. Janet Bewley, D-Ashland. “It's always a way to see if the governor could find a way to so-call save money, or find money that he would be able to apply to another portion of the budget.”

The move to self-insurance is not reinventing the wheel nor a controversial idea in and of itself. Currently, 20 states self-insure all state employees, while 26 other states self-insure some state workers, according to the National Conference of State Legislature.

Wisconsin already self-insures dental and pharmacy benefits, and less than 5 percent of workers are in a self-insured medical plan, according to Wolfe. This shift would self-insure the whole program.

For the UW System and UW-Madison faculty, benefits are not expected to change. But Jack O’Meara, leader of the faculty’s lobbying group, said comments made about Wisconsin’s high benefits compared to other states could indicate plans for future cuts.

Although the basis for the shift is the creation of $60 million in revenue, there is a fear that the revenue won’t materialize, leaving the state with more costs to pay and state employees with less coverage.

Additionally, some say that the Joint Finance Committee can find other ways to fund K-12 education even if the state does not switch insurance models.

“We can afford to do whatever we believe is the most important thing. If schools are more important than something else, you find a way to fund it,” Bewley said. “You don’t say, ‘Oops, I couldn’t do that so I’m not going to fund schools.’ No. No, you don’t.”

“Just because we’re not going to do self-insurance doesn’t mean that there’s not another way to get funding for schools. You find it. You find it somewhere else.” 

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