Attorney General Opinion States Municipalities Can Offer Self-Insurance If State Does

On Nov. 6, Attorney General Brad Schimel issued a formal opinion stating that if the Group Insurance Board offers health insurance on a self-insured basis, municipalities are also authorized to do so. The opinion came at the request of Gov. Scott Walker, who proposed moving state employees to self-insurance in his 2017-19 state budget. The move was estimated to save roughly $60 million over the biennium. The Joint Finance Committee rejected his proposal, achieving the savings through other cost-saving methods.

The question on whether self-insurance would extend to municipal employees arose last spring during Joint Finance’s work on the budget. The Department of Employee Trust Funds (ETF), which manages the state and local government employee health plans, stated that they have the statutory authority to provide self-insured group health plans to state employees and eligible employees for local governmental employers. However, ETF’s assessment was questioned by a Legislative Council attorney.

In a memo, the Legislative Council attorney cited a 1987 Attorney General opinion (76 OAG 311), stating that self-insured health care may “in effect limit the options for local public employers to offer plans through the state program.” The memo pointed to the Wisconsin Constitution, which prohibits the state credit from being given or loaned in aid of another [Art. VIII, s. 3, Wis. Const.].

The central question raised was if the state was to self-insure health care for local employers and employees, would there be an issue of the state taking on the obligation of debt of another, which is prohibited by the constitution.

In his opinion, the Attorney General examined this element, concluding that self-insurance offered to municipal employers is not a violation of the constitution, as interpreted by the Wisconsin Supreme Court, “because it does not extend ‘credit’ in the sense that the state acts as a guarantor of private entity’s debt.” According to the opinion, there have been multiple Wisconsin Supreme Court interpretations on article VIII, section 3, including in the Libertarian Party, 199 Wis. 2d at 821, where the court explained that, “[t]his section prohibits the state from granting its credit in aid of a private business.” Furthermore, this section does not relate to the provision of services or administration of programs.

The Attorney General’s opinion does not change the outcome of the self-insurance proposal. However, if the issue was to be revived in the future, the governor now has the Attorney General’s legal opinion to eliminate concerns about the impact to local employees.