Idaho Department of Insurance Director Dean Cameron is raising major concerns about a consultant’s recommendation that Idaho switch to self-funding for the health insurance plan that covers thousands of state employees. “This is a very difficult, complex, complicated issue,” he told the Legislature’s interim committee on state employee group insurance and benefits this afternoon. “I appreciate the difficulty in the decision of trying to do what’s best for the state of Idaho in the pocketbook and the taxpayer, as well as doing what’s best for state employees. Also as an employer, as someone who’s hiring and trying to attract and retain good people, the importance of having a good benefit package has been paramount, particularly given our competitiveness with wages.”
Cameron said he has several concerns about the consultant’s recommendations. Among them: “I’ve heard a lot of discussion about potential savings. … It is really a decision, in my opinion, about how much financial risk you want the state of Idaho to take on. What’s the liability you want the state to take on?”
Cameron said, “It might make financial sense. But on the other hand it may not. And maybe even if it does make financial sense, maybe the risk that you potentially put the state and the state taxpayer in isn’t worth the savings that you might achieve.”
He also noted that the bulk of the anticipated savings come from no longer having to pay certain taxes on insurers that now are required under the Affordable Care Act – but he said those taxes might well go away. “I don’t think anybody here can predict what Congress is going to do – I certainly can’t,” Cameron said. “I predicted they would do something a long time ago, and they haven’t done it yet. Nonetheless, they’re still trying.”
Cameron said the consultant’s report suggests that flexibility for the state is the major advantage of shifting to self-funding, but he said Idaho already has much or all of the same flexibility under its current hybrid plan with Blue Cross.
In discussions in the committee earlier today, members discussed the possibility of a third-party administrator – possibly even Blue Cross, the current insurer – handling many of the same tasks it takes on now under a self-insured arrangement.
Cameron said he’d suggest that if the committee wants to send out a Request for Proposals, it should “allow carriers to quote it both ways” – self-insured, and fully insured through a hybrid model like the current one.
“At the end of the day, my overall concern is that we adequately analyze the potential financial risk and the potential costs,” Cameron said. “I believe there are additional costs. … If you went away from the hybrid model, I think you would need to have additional employees in the Department of Administration, even if you utilize a third-party administrator. I think you’re going to have additional costs in revamping your payroll. I think there are some additional costs that need to be considered before you completely head down that path.”
He also noted a concern about the consultant’s recommendation that with the flexibility of self-funding, Idaho could impose surcharges on state employees’ health insurance premiums for things like smoking or covering a spouse who had the option of coverage through the spouse’s employer.
“I’m not much of a fan of the idea of surcharging our state employees,” said Cameron, who was the longtime co-chair of the Legislature’s joint budget committee before he took over at the Department of Insurance; he also had a long professional career as an insurance agency owner in Rupert. “I do know that you can direct, and some of the major savings comes from being to direct people’s care,” Cameron said. “But I would encourage you to consider using carrots rather than sticks in directing their care. Reward them for smoking cessation, rather than penalizing those that smoke. Reward them for losing weight. … I think those things can be done under either a self-funded approach or a hybrid approach.”
He said, “I commit to you the department is ready, willing and able to assist you as you try and grapple with this tough decision.”
The interim committee then took a break, and when it returned, several members had had to leave. Co-Chair Sen. Todd Lakey, R-Nampa, said the committee will hold another meeting in the coming weeks to have its final discussions and make a decision on how to proceed on self-funding.