The immediate resistance to the one bold initiative in Gov. Walker’s state of the state message is perplexing. He called for self-insurance for health care for state employees, a move everyone should love except for the incumbent health insurers.
The Wisconsin politicians who oppose to move, including members of his own party, remind me of the weatherman who sits in his windowless cubicle and predicts a pending rain storm. If he would stick his head outside, he would realize it is already pouring cats and dogs.
If our erstwhile legislators would get out into their districts and talk to business people, they would soon learn that most sizeable companies already self-insure for coverage of their workforces. They would learn that self-insurance opens the door for huge savings.
They would also find out that local governments, especially school districts, enabled by Act 10, are taming run-away health costs by taking on heir own risk management. If it works for local government, often in unionized environment, why would it not work for state government?
There are two obvious reasons for the pushback from legislators. First, legislators themselves are on the state plan, and it is viewed as a rich plan because it is an expensive plan. Wrong answer. It is expensive because it is under-managed by the Employee Trust Fund (ETF). The self-insured plans in the private sector are often better plans.
Second, the lobbies for the health insurers, hospital corporations and doctors write big checks for political campaigns.
At some point, though, the politicians have to look past their own interests and do the right thing by the taxpayers. ETF spends north of $1.1 billion annually on 65,000 state employees and their families. That equates to about $18,500 per employee, far above the best practice in the self-insured plans at private companies and local governments.
You can do the math. Best practice in the private group plans is about $13,000 per employee. If ETF operated at that level, the annual savings to taxpayers would be a staggering $350 million. How can political leaders not take advantage of that gift horse?
Here’s the greatest irony: state workers would get an improved health plan.
What happens when a payer organization goes self-insured is that they become hugely motivated to manage the risk in their plans. They innovate.
For instance, they often put in primary care clinics for their people, conveniently located on or near the workplace. Often it’s free or very low cost. The health teams there are hired for the express purpose of keeping members well and out of expensive hospitals.
They benefit from proactive care versus reactive care. Employee well being goes up, and costs go down.
Further, they invariably deploy incentives and disincentives in consumer-driven plans. Employees start acting like consumers so they build up their Health Savings Accounts, which have huge tax advantages for employees. Over-utilization disappears, smart buying appears and big savings result.
The self-insured plan managers soon steer their members to best value when they need a treatment or surgery. That means hospitals or clinics with low infection rates and bundled prices. Why pay $47,000 for a joint replacement, or more, when they can be bought for $28,000 in Southeastern Wisconsin, with a warranty against readmissions? Savings from smart purchasing, again, are huge and outcomes improve.
The point here is that self-insurance is just the first enabling step toward improved workforce health and lower costs of quality care.
Gov. Walker promised to use the first round of savings of $41 million from going self-insured for K-12 education. That’s smart policy and smart politics. You can’t go wrong investing in kids.
Here’s the final irony as this debate over self-insurance kicks off. Health insurers and hospital corporations are some of the biggest employers in Wisconsin. Note: they are almost all self-insured for the health care of their workforces, as they should be.