By Sally Drew, President
Issues and Concerns with Potential Outcome of
Group Health Insurance RFP processes
Administrative Services: Current Situation
The State of Wisconsin Group Health Program (GHIP) and Wisconsin Public Employer Program (WPE) are for the employees of 58 State agencies, the State of Wisconsin Legislature, the University of Wisconsin (UW) System, the University of Wisconsin Hospital and Clinics, 368 local government employers’ employees, retirees, and dependents. The GHIP/WPE programs make up one of the largest health plan groups in Wisconsin, spending $1.4 billion in health insurance premiums annually.
There are 95,382 individuals and 207,435 participants in the GHIP and 15,066 individuals and 39,546 participants in the WPE for a total of 110,448 individuals and 246,981 participants.
Currently, most health insurance benefits (98%) are administered through 17 competing, fully insured health plans that offer a prescribed “uniform benefit” package (“It’s Your Choice (IYC) Health Plan”, IYC High Deductable Health Plan.) The health plans follow the Board’s guidelines for eligibility and program requirements and participate in an annual competitive premium rate bid process. Most health plans are health maintenance organizations (HMOs) and one is a preferred provider organization (PPO).
The State also administers a small self-insured offering through both the “IYC Access Health Plan” and “State Maintenance Plan” that are administered through a single administrator.
The pharmacy benefit program is self-insured and has been administered through a Pharmacy Benefit Manager (PBM) since 2004. This includes providing Medicare Part D benefits through an Employer Group Waiver Plan (EGWP) since 2012.
The uniform dental benefit program is also self-insured as of 2016.
The current RFP does not include seeking administrative services for pharmacy or dental programs.
The ACE Board has a number of concerns and many questions about the potential impact of the changes proposed by Segal Consulting and the RFPs that are currently being issued and evaluated.
1. Self-insurance issues and concerns
Under the current structure, the health care providers bear the risk of costs exceeding projected expenditures. Under a self-insurance model, the state takes that risk.
Can self-funding deliver significant savings, provide the same level of access to quality care and keep the health care cost trend at or below 2.5 percent increase per year? That's the track record of the current market competition approach. In fact, the GIB announced at its August 16, 2016 meeting that the 2017 state premium increase rate for non-Medicare participants would be 1.6%, continuing the successful negotiation process with participating health plans.
Some of the 17 providers do not have the capacity to provide a self-insured plan for state employees and might need to work with another self-insured network to put their clients into a self-insured model.
When a self-insured plan is first instituted, there are no claims paid for the first couple of months. During the first year of implementation there will likely be a 13% savings on costs (which come due during the two months after the plan time period ends). Thirteen percent of one year’s worth of state employee claims is $42 M. It has been surmised that this is the basis for the $43 M saving projection for the state becoming self-insured.
If so, this is a one-time savings? What happens to costs after that? Can anything be learned by looking at existing self-insured programs? Is it worth making such a big service shift for one-time savings unless savings can be sustained?
The self-insured plans for Milwaukee County employees and the WPS self-insured plan for state employees are much higher in cost than the other state employee plans. When first implemented, the Milwaukee County self-insured plan did have first year savings (see paragraph above) while Scott Walker was County Executive, but in the following years the increases ranged up to 20% annually.
When ACE asked ETF how much funding the state would have to set aside to create a fully self-insured system, Lisa Ellinger noted that Segal recommended maintaining a cash reserve of 25% of paid claims in the first year. She noted that this could be funded by a “minimal increase” to the monthly employer and employee contributions.
2. Disruption in access to and quality of services
The RFP utilizes the Department of Health Services (Medicaid Regions) in place of the current regions and seeks national, statewide and regional providers. The concept is to provide more access for rural areas of the state, but could end up limiting access to fewer providers in urban areas. Some providers think the GIB intends to choose one national and up to two regional providers for each Medicaid Region.
The combination of self-insurance and regional changes creates the potential for disruption of services. According to Justin Sydnor, UW Madison Business professor, any disruption from self-insurance might be greatest in Dane County, where Dean Health Plan, Group Health Cooperative of South Central Wisconsin, Physicians Plus, Unity Health Insurance and WEA Trust compete for the state worker business. Four of these plans are “homegrown”. Dane County currently has the lowest costs in the Wisconsin State Employee Health Plan, approximately 16% less, and the highest quality rating.
It is not clear that statewide or national groups will be able to negotiate the same discounts with hospitals and other providers as the current competitive provider environment has accomplished.
While an RFP can provide vendors' administrative cost projections, the broader impact of self-funding cannot be determined through an RFP. If some providers are unable to operate in a self-funded environment or are eliminated due to fewer providers being selected in a region, it may impact other Wisconsin residents not part of the state employee program. Department of Employee Trust Funds Strategic Health Policy Director Lisa Ellinger made that point in a June 7 Wisconsin Health News panel discussion, when she said the impact on the broader Wisconsin market is outside the scope of the RFP.
3. Medicare annuitants and non-Medicare retirees may be treated differently from active employees
The RFP leaves open the possibility that the awarded proposals will not cover Medicare annuitants. Separating this group was a recommendation from Segal Consulting. There are currently 12,404 single Medicare annuitants and 20,735 Medicare family annuitant participants.
Segal’s recommendation leaned in the direction of separating retirees from active employees, even though unlike other states the consultants have studied, Wisconsin retirees pay the entire amount of the health insurance costs. Segal believes that retiree’s age and the illness rates drive up the premium for younger and healthier active employees. Segal seems to recommend that eligible retirees utilize Medicare Advantage Plans to maximize the federal money and minimize their premiums. Medicare Advantage Plans that Segal has looked at in other states are generally national plans. The need to potentially change providers could cause disruption in health care for retirees.
While Segal claims that the use of sick leave to pay for these plans would not be affected, it is important to make sure that this is true, and that the sick leave conversion program continues if changes in structure and process are made.
Timeline and ACE Activities
The RFP responses are due September 9 and the GIB will meet November 30 to make recommendations for future changes. The Joint Finance Committee will then have 20 days to respond to the fiscal impact of the recommended changes. ACE will follow and report on these activities and will also meet with selected legislators.
ACE is also planning a meeting on September 26 to hear from a number of speakers on this topic. More information will be provided on this meeting soon.
