What could a state switch to self-insurance mean to you?

Change included in Gov. Walker's budget plan

A major proposal in Gov. Scott Walker’s budget would change health insurance for state employees.

News 3 looked into what the change might mean for people across the state.

The model as it stands now has the state pay HMOs for health coverage in advance. The new self-insurance model would change to the state having you go to the doctor, then having the doctor send them the bill administered by some health care companies.

A UW professor of risk management and insurance said the average state employee may not generally notice a difference.

“For an individual, this won’t look any different for you,” said Justin Sydnor, associate professor of risk and insurance at the Wisconsin School of Business. “You’ll still have an insurance card, you’ll still go to the doctor and they’ll place a bill and the bill will first go through insurance. So for an individual going to your doctor it really won’t have any change.”

There is one caveat to this: Some employees may not be able to keep their current doctor.

“There will be certain places in the state where there will be a big disruption, in particular in Dane County,” Sydnor said.

The self-insurance plan as it was approved by the group insurance board this week would take 17 possible health care administrators down to seven, with availability differing by region. That means if you’re with a smaller company like Group Health Cooperative or Mercy Health, you might no longer be able to see your doctor.

“Elsewhere in the state there will be a few small systems, especially very small integrated community health systems that likely won’t fully participate,” Sydnor said. “But we don’t know exactly all the details of which doctors will remain in the network.”

So, what if you’re not a state employee?

You may care about the costs of the shift in plans. The state is assuming more risk by paying directly instead of having an HMO assume the risk — meaning they don’t know exactly how sick all of the members will be in a given year and what they’d have to cover.

But really you may care because of the ripple effect that’s possible on the health care market in general.

“If you’re currently a member of Group Health Cooperative but not a state employee this doesn’t immediately affect you,” Sydnor said. “Over time, however, by removing all the state employees from the network of some of these smaller players like GHC, it could hurt their competitive position over time and that may lead them to exit the market or be bought up by other players that could be a downstream effect that could happen over time.”

Then there’s a question about costs. Competing consultant reports gave the state Group Insurance Board differing numbers — saying that it could save $40 million or cost $100 million. The governor assumes in his budget that it could save anywhere from $60 to $120 million.

It’s hard to know which number may be right.

“I think the key thing to take away from all of that is that there is huge uncertainty as to how much this will save and even whether this will save any money,” Sydnor said.

He explained that while many other states use self-insurance, including neighboring Minnesota, Wisconsin’s setup could be different.

“The state is a bit different than other large employers because in large part of our starting position that we currently have a very unique system where we get competitive bids from 17 different insurers,” Sydnor said. “We’ve already created a system with a lot of competition to hold down costs and that’s very unique. Most other big employers and most other states don’t look like that.”

That self-insurance plan would still have to be approved by the state Legislature. Lawmakers have already been expressing concerns about how the change might effect the insurance market.