JFC to Vote on Self-Insurance Contracts Next Week

As expected, the Joint Finance Committee objected to the Department of Employee Trust Funds’ signed contracts to self-insure the state employee’s health plan. JFC’s passive review of the contracts required an objection, otherwise the state would be able to move forward. The three-year contracts include contracts with a statewide/nationwide vendor and four regional vendors.

The governor’s 2017-19 budget assumes the state will achieve $60 million in savings from the move to self-insurance ($20 million general purpose revenue (GPR) in 2017-18 and $40 million GPR in 2018-19). Walker’s budget in turn invests the savings in K-12 education and uses it to offset increased salary and fringe benefits of UW-System employees.

In recent weeks, the governor and senior members of his administration, have stepped up public pressure, urging JFC to adopt the self-insurance proposal. Since the governor’s budget introduction, JFC members, including co-chairs Rep. John Nygren (R-Marinette) and Sen. Alberta Darling (R-River Hills), questioned the savings attributed to the move to self-insurance.

A May 31 Legislative Fiscal Bureau memo to JFC, estimated the minimum savings from the switch to self-insurance to be $29.7 million GPR over the biennium, a drop from the assumed $60 million GPR in the governor’s budget.

The memo also provided background on the state employee health program’s reserve balance. At the end of 2016, the reserve had a balance of $144 million. This balance equates to 28 percent of 2016 claims and is outside of the Group Insurance Board’s policy, which sets a reserve balance level of 15 – 25 percent of the sum of 100 percent of self-insured claims and 20 percent of fully insured claims.

On Tuesday, June 5, at a Wisconsin Health News lunch featuring the JFC co-chairs, they questioned the high reserve balance and stated that they will be asking the Legislative Audit Committee to request an audit from the Legislative Audit Bureau on the State Employee Health Care program. The co-chairs stated that they believe there needs to be more legislative oversight of GIB’s decision and pointed to the example of GIB ignoring their own policies on reserve balances as another reason for increased legislative involvement.

The co-chairs also commented that although JFC will reject the self-insurance proposal, that the committee will be able to identify matching savings ($60 million) through use of the reserves and program changes, including increased deductibles and health plan incentives. Despite these concepts, the details on how JFC will achieve the savings is still not clear.

JFC plans to take up the contracts on Thursday, June 15.