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Joint Finance Committee Rejects Self-Funding Contracts

Committee uses program reserves, plan design changes to offset savings in Governor’s budget

June 16, 2017

The state Legislature’s budget committee unanimously rejected contracts sent to them from the state’s Group Insurance Board (GIB) that otherwise would have provided state employee health insurance through self-funded third party administrators. During the last legislative session, the Assembly and Senate passed a bill which was eventually signed into law as 2015 Act 119 providing the Joint Finance Committee (JFC) with “up or down” review of a contract to offer a self-insured health plan(s) for state employees. 

The contracts provided to the JFC would have implemented the GIB’s previous recommendation to separate the state into four regions for the purposes of offering one or two self-funded health plans in each region, in addition to a broad statewide network offering. Gov. Scott Walker’s proposed budget used $60 million in state general purpose revenue (i.e. sales and income taxes) from savings associated with shifting from a fully-insured to a self-insured program.

The JFC decided to appropriate slightly more, $63.9 million in savings, from the state employee health insurance program but not as a result from moving to a self-insured model for health plans. The savings would be a result of an additional $22.7 million in negotiated savings with fully insured health plans, using $25.8 million in program reserves to reduce costs and an additional $15.4 million as a result of various other policies, including benefit plan changes. The JFC required that the GIB’s benefit plan changes could not increase costs to state employees by more than 10 percent compared to their current out-of-pocket costs.

In addition, the JFC’s action would require a Legislative Audit Bureau report on current GIB program reserve levels and reporting to the JFC on the Board’s plans to use state employee health insurance reserve funds over the next two years. Finally, the JFC’s action also would add members to the GIB appointed by the four legislative leaders, require Senate confirmation of GIB members appointed by the Governor and require that any changes to the state employee health insurance program be reviewed with the JFC.

Each of these provisions added by the JFC still needs review by both the full Senate and full Assembly before being sent to Walker for his consideration. On the other hand, the contracts sent to the JFC will not move forward since the JFC voted to reject them. 

For a copy of the Legislative Fiscal Bureau’s review of the proposed contracts submitted by the GIB, go to https://docs.legis.wisconsin.gov/misc/lfb/section_13_10/2017_06_15_group_insurance_board_contracts_to_self_insure_for_state_employee_group_health_plans.pdf.
 

This story originally appeared in the June 16, 2017 edition of WHA Newsletter