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Consultants: Self-funded insurance would save the state money

The Idaho Statehouse.

The Idaho Statehouse. A consulting firm hired to examine a proposal for the state to move toward self-funded insurance says the move would make financial sense. File photo

The state of Idaho has taken another step toward changing its state employee health insurance to a self-funded model, which could take effect as soon as next July.

Mercer, the New York-based human resources consulting company hired by the Legislature as an advisor on the question of insurance, recommended the move to the State Employee Group Insurance & Benefits Committee on Nov. 8.

“Based on the findings of this project, Mercer recommends for the sustainability of State of Idaho’s Employee Group Health Benefits Programs that the Interim Committee recommend moving forward with the self-funding of your medical plans,” wrote Mercer in its presentation to the committee.“Our recommendation is driven by the potential savings and the necessary flexibility needed for the implementation future plan/cost management strategies.”

The state of Idaho now uses a hybrid model of coverage for its workers. The plan is administered by Blue Cross of Idaho and it offers some self-funding features, but also includes protection for the state by paying for medical costs over 110 percent of the premiums that the state pays. Dave Jeppesen, executive vice president of consumer healthcare for Blue Cross, warned how easily a few incidents, such as a couple of babies in intensive care or a case of cancer, could spike medical costs, for which the state would then be liable.

But Sean White, a Mercer principal, pointed out that Idaho had never gone over the 110 percent level. Shelli Stayner, a principal in Mercer’s Boise office, noted that even under a hybrid plan, having many claims in a year could increase premiums the following year.

The question of switching to self-funded insurance has become a campaign issue in the contest for the Republican nomination for governor. Candidate Dr. Tommy Ahlquist has claimed, citing a Milliman report, that Idaho could save as much as $60 million over three years by going to a self-funded model. That report also criticizes Idaho’s hybrid model, noting that only two states use such a system.

“Any way you look at it, the state becoming fully self-insured will save Idaho taxpayers millions of dollars and at the same time have no change to state employee benefits and potentially lowers their premiums,” said campaign manager David Johnston in an email message. “The fact the state has not acted sooner to save taxpayer money and help state employees save money on their health insurance is a clear sign Idahoans need a political outsider like Tommy as governor who can bring a fresh approach and new ideas to state government.” Other gubernatorial candidates had not responded to an inquiry by press time.

Donna Yule, executive director of the Idaho Public Employees Association, or IPEA, the public employees union, said the organization has not taken a position on the issue, and criticized the Ahlquist campaign for taking its position before the committee had finished its work. “Running a campaign on this issue before this process is done is not a wise thing to do,” she said.

Self-funding could also make it easier for Idaho to implement factors intended to guide behavior, such as adding surcharges for state employees who smoke tobacco – something that Mercer already included in its Multi-Year Strategic Roadmap for the 2019-2020 fiscal year. But Dean Cameron, director of the Idaho Department of Insurance, advised against this approach. “I’m not much of a fan of the idea of surcharging our state employees,” he said, suggesting that the committee use “carrots instead of sticks.” State Rep. Phylis King, D-Boise,  who serves on the House Commerce and Human Resources committee, was also concerned about the state’s ability to intervene in claims decisions.

In addition, Cameron warned the committee against its suggestion that, like some Idaho counties, it exempt itself from the Chapter 40 regulations on self-funded insurance. Typically, those regulations would require that the state set up an irrevocable trust to store its reserves.

Legislative leadership has asked the committee to make a decision by the end of November or at most a week later, co-chair Sen. Todd Lakey, R-Nampa, said. The next meeting is tentatively scheduled for December 1.

 

Watch IBR’s segment on KTVB Friday’s at 4 p.m. On Nov. 10, IBR Editor Anne Wallace Allen discussed the topic of self-funded insurance with KTVB’s Doug Petcash. Click here to watch the video.

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