Consultants have said self-insurance could save
The new report, by staff at the state
The board is expected to discuss bids from companies seeking to participate in a self-insurance program in closed session Wednesday and act on the matter publicly
The move could take effect in 2018.
Currently, nearly all state workers and dependents, almost 100,000 of whom are in
Under self-insurance, the state would pay benefits directly and take on the risk. One or more companies might help administer the program.
By switching to self-insurance, the state could avoid an Affordable Care Act fee and an insurance risk charge, which compensates insurers for taking on the risk of health benefit costs, according to the new report. The report acknowledges, however, that "recent political events have called into question" the future of the health law and its fees.
The report doesn't quantify the potential savings from insurance fees, but a previous report by
Self-insuring could also allow the state to save more money through wellness and disease management initiatives, the new state report said. "Because (self-insuring) employers bear the financial risk of claims cost, they also receive all of the rewards when they are better able to manage their claims cost," the report said.
Administrative costs by companies that run self-insurance programs generally are less than those charged by insurers, but the state's own administrative costs could rise because more staff would be required, the report said.
Other concerns about self-insurance include assuming the risk for state workers' relatively high disease burden. About 64 percent of state workers have chronic medical conditions, compared to 50 percent of workers nationally.
"The full amount of this risk will be borne by the state" under self-insurance, the report said.
Legal liability also could increase, and insurance companies may not be able to pass on certain savings as much if they're acting as administrators and not insurers.
In the current system, HMOs submit bids each year. Those with the lowest bids -- and to some extent, those with the best quality scores -- are assigned the lowest premiums for employees. Health plans can lower their bids to move into the favored status.
Over the past nine years, the state has saved
However, the current program is hard to administer because it involves so many insurers, and the state has little leverage to influence health plans for which state workers make up a small percentage of members, the report said.
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