Did Politics Trump Good Policy in Self-Funded Insurance Debate?

The following column originally appeared at the MacIver Institute.

At long last, the Legislature’s Joint Finance Committee will have to make a decision on whether to adopt a self-funded insurance system for state employees’ health insurance. The bad news is that Governor Walker’s proposal to make the switch and save $60 million is all but dead in the state Legislature.

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On Monday, the Group Insurance Board submitted contracts with third-party administrators for a self-insurance system. Those contracts spell out in black and white at least $60 million in savings over the biennium – that’s on top of $22 million in possible savings if Obamacare and its obscene tax burden is not repealed. With the contracts in hand, JFC now has about three weeks to convene a meeting and make a decision.

“Since taking office, we have sought to reform government to make it more accountable and cost effective to the hard-working taxpayers,” Walker said in a statement on Monday. “Moving to self-insurance is one of these reforms and we urge the Joint Committee on Finance to approve these contracts and invest these savings into the classroom.”

Unfortunately, it appears that JFC is prepared to leave this windfall for taxpayers on the table. Why? We’ve heard a carousel of arguments against self-insurance that have all stalled, but the final stand for self-insurance naysayers might boil down to pure politics.

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Early arguments by opponents of self-insurance breathlessly claimed that the move would gut state workers’ health insurance plans. Ignoring how out of step these lavish plans are compared with their private sector counterparts, it quickly became clear this doom-and-gloom claim had no basis in reality – especially after the actual proposals were received.

Next, the self-insurance doom-mongers portrayed the switch as a journey down a long, dark tunnel. The fact is that there’s nothing mysterious or scary about self-insurance; Wisconsin already partly self-insures its dental plan and its pharmacy plan.

At least 20 states completely self-fund their state employee health plans, including Minnesota, which moved to 100 percent self-funded insurance in 2002. Also, 46 states use self-insurance in some way.

In the upper Midwest, no states are fully-insured, meaning none completely rely on private insurance and all are self-funded at least in part.

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More than 90 percent of all large employers, companies that employ 5,000 or more employees, also use self-funded insurance. To say adopting this system would be risky and experimental is diametrically untrue. In fact, it would be routine and economical.

Critics then moved on to prophesizing that the switch could pose a potentially catastrophic financial risk to the state. True, the state would be directly assuming the risk rather than putting insurance companies in the middle. But barring an unprecedented epidemic sweeping state office buildings, the risk factor has been greatly hyped.

The risk would actually be low because of the sheer size of the state’s workforce, which means total annual payouts would be predictable and fluctuations minimal, according to insurance expert Dean Hoffman, who recommended the switch to the Governor’s Commission on Government Reform last May.

Legislative Republicans are also uncertain about the future of Obamacare, which imposes a variety of taxes and fees on the insurance marketplace that would be absorbed by taxpayers in Wisconsin.

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JFC co-chair Sen. Alberta Darling cited Wisconsin’s relatively low premium increases at a Tuesday press conference. “Why would we want to shift out of that and into uncertainty at this point?” she asked.

Caution isn’t unreasonable, but moving to self-insurance would actually protect Wisconsin taxpayers from uncertainty. Taxpayers should be the focus, not protecting the platinum health insurance of government employees.

Obamacare hits the insurance market, and thus taxpayers, in two big ways. The reviled Obamacare Cadillac Tax applies an exorbitant 40 percent tax on all employee benefits exceeding $10,200 annually for an individual, $27,500 for a family.

Sadly, the AHCA healthcare bill that passed the House last week retains the Cadillac Tax, although it pushes off the starting date of the Cadillac tax until 2026. Self-insurance would help mitigate that cost by eliminating the middle man in the current setup.

Then there’s the insurer tax, a special levy charged to private insurance companies that’s tied to the insurer’s premiums collected in the previous year. In 2016, the insurer tax ranged from 1.5 to 3.5 percent, with future rates yet to be decided. As the state’s deputy commissioner of Employee Trust Funds, Lisa Ellinger, pointed out last year, the state pays out about $1.4 billion annually in premiums.

Self-funded insurance systems are exempt from this tax. Quick cocktail-napkin math shows that switching to self-insurance would conservatively save tens of millions on top of the $60 million outlined in the contracts.

Despite ongoing uncertainty about Obamacare, keeping the status quo is precisely the wrong decision. Assuming Obamacare’s taxes are here to stay, seizing the $60 million moment would be responsible management of taxpayer dollars. Keeping the status quo and hoping Washington politicians do the right thing would not.

Instead, legislative leaders are considering “finding” $60 million in savings within the existing system. “We’re not saying no to savings. If we do that we’re going to find a similar amount of savings in some way, shape or form,” said JFC co-chair Rep. John Nygren on Tuesday.

If that’s actually possible, it begs the obvious question: how much taxpayer money has been wasted by not finding these supposed savings years ago?

With most of the arguments against self-insurance out of gas, opponents’ final stand may betray the truth: self-insurance is good policy, but protecting the status quo is even better politics. Or protecting the status quo is better politics for any politician worried more about the next election and less about taxpayers. Unfortunately for taxpayers, just about every politician in Wisconsin fits in that category.

The fact that self-insurance is good policy is evident from how many states and large employers use it successfully.

The likely end result is that Wisconsin taxpayers will get a watered-down half-measure that goes through the motions of saving taxpayer money while keeping the bloated and expensive existing system in place. That’s bad public policy.

The Ed: Sad State of the Democratic Party

This week’s Martinicast editorial:

Wisconsin’s Democratic Party is a mess.

A series of crushing defeats – losing to Scott Walker three times in the past four years, losing the Assembly, losing the Senate – have Democrats in this state doing a lot of soul-searching.


Try as they may, they just can’t figure it out. Dem leaders Jennifer Shilling and Peter Barca offered limp denunciations of protesters camping out at Scott Walker’s home in Wauwatosa, where the governor’s 70-something mom and dad are living.

Barca said: “Generally speaking I think it’s better off not to visit people’s homes.” Oh, is that what they’re doing? Visiting?

Shilling said: “It’s their right. I don’t know that I necessarily agree with that.” No, it’s not their right to invade someone’s property. This from the woman who sat idly by as her allies dumped roofing nails in ousted Senator Dan Kapanke’s driveway and county snowplows buried his mailbox. Shilling had nothing to say then. Now, she’s struggling against her instincts to trash the place when Democrats don’t get their way.

Speaking of struggling against instincts, the Democrats are searching for a new leader to replace outgoing firebrand Mike Tate, the architect of Democratic failures. The slate of candidates is more of the same, the same old pitchfork-and-torches types that make the Democrats feel comfortable.

Meanwhile, the one shining victory of the Dems in the past few years may be coming unraveled. Marquette Baylor, the staffer for Sen. Tammy Baldwin, has decided not to take the hush money offered to her after the Senator canned her in the wake of the Tomah VA scandal. Instead, she’s suing. This could destroy Baldwin.

And pundits on the left whose noses are certainly raw from scraping the ceiling have lined up in an all-too predictable diatribe bemoaning a “GOP War on Knowledge.” One columnist wrote that Walker is putting scientists on the chopping block. Another lefty writer actually claimed Walker is waging a “dangerous war on knowledge.” Because science doesn’t happen if it’s not funded by a bloated government budget.

It’s all a transparent attempt to portray the Governor as a brutal barbarian. Watch as it unfolds into a concerted effort to paint presidential candidate Walker as dumb.

Dumb he is not. In fact, the most crushing defeat for the Democratic Party wasn’t necessarily at the polls in recent years. Where they saw a beautiful display of democracy, everyone else saw a mob of thugs trashing the capitol, or protesting in front of a private home occupied by an elderly couple.

Walker played all of this – and the Democrats – like a ukulele. In a way the Democrats themselves created Scott Walker, the presidential candidate with double digit poll numbers in early primary states.

It’s a time for soul searching in the Democratic Party of Wisconsin. But they’re all struggling against their instincts in the process. And as long as they convince themselves Republicans are some combination of evil and moronic, they will continue to lose.

Underestimating Mary Burke: A Fatal Error

Opening Remarks

But as Governor Scott Walker daydreams about new drapes in the Oval Office, Democrats have suddenly gotten serious about unseating him from his day job, from the one that’s in Wisconsin.

One Democratic contender for governor in Wisconsin just upped the ante significantly by signing up a bunch of A-list Democratic campaign staffers, including two key members of President Obama’s campaigns for president.

Rachel Maddow

A stunningly incompetent and embarrassing spokesman, a bench thinner than Don Rickles’ hairline, and a seething mass of meatheads and idiots in the state legislature make it easy to underestimate Democrats in Wisconsin.

Too easy. But it’s not the Democrats in Wisconsin that Governor Scott Walker’s re-election campaign should worry about, it’s the crack Democratic team that put President Obama back into office, staved off Republican gains in the 2012 elections, led a corrupt and beholden Terry McAuliffe to victory in swing state Virginia, and who now is looking for apartments in Madison.

To clarify and sharpen our commentary from yesterday, recent events should have the Walker team sweating just a little, maybe even putting down their cigars and scotch. As Walker starts setting the stage for a possible presidential run in 2016, he may be making a fatal mistake that could cost him everything: taking 2014 for granted.

To start, let’s examine Obama’s 2012 strategy. By staging a horse and pony show that came to be dubbed the “war on women” – seems we can’t go one decade without a war in this country – Democrats very cunningly micro-target certain groups, particularly single women, and try to create the widest margin possible.

Democrat Terry McAuliffe trounced Republican Ken Cuccinelli by an astonishing margin among single women, which was the race.
Democrat Terry McAuliffe trounced Republican Ken Cuccinelli by an astonishing margin among single women, which was the race.

The corrupted and beholden Mr. McAuliffe, who won, hit Mr. Cuccinelli hard on issues that appeal to single women, and very effectively targeted that demographic with the heat of a thousand suns. While the corrupted and beholden Mr. McAuliffe, who won, lost married women by 9 points, he won single women among whom pro-abortion, pro-birth control messages resonate, by an astonishing 42 point margin.

Take a second to understand that figure – Cuccinelli lost single women in a face-melting blowout. In a two point race, that was the election in a classic swing state.

All the while, the RNCC and national Republican groups effectively abandoned Mr. Cuccinelli five weeks before the election, despite the fact that he eventually lost by only two points. The RNCC miscalculated – biffed it – bigtime. Their decision to pull support probably cost Cuccinelli the election; it was a breathtakingly enormous mistake.

Where Democrat cunning meets Republican incompetence, as it did in Virginia, Democrat cunning will win almost every time. Now Team Cunning is coming to Wisconsin. The JS reports:

  • Jim Margolis, who handled advertising for President Barack Obama’s two national campaigns, has signed on as Burke’s media strategist.
  • Diane Feldman, who polled for Tammy Baldwin’s successful U.S. Senate campaign in 2012 and Gwen Moore’s 2004 race for Congress, will be Burke’s pollster.
  • Pete Giangreco, who was the lead of direct mail for Obama’s first Democratic presidential primary campaign as well as Baldwin’s 2012 campaign, will run Burke’s direct mail operation.

The three horsemen of Democratic cunning bring with them much more than the specter of relentless demographic based messaging or the intelligence of some very capable professional politicos, they bring the strategy of today’s most successful and beautifully simple left-wing campaigns and rolodexes full of the phone numbers of some of the most impressive heavy hitters in the country. These people are not to be underestimated.

Mr. Walker has a solid message of conservative reforms that have put the state back on solid fiscal footing and lowered taxes for many Wisconsinites, though a $13 property tax cut rings hollow with many, anecdotally at least. He’s genuinely concerned with running a responsive government that pinches pennies and does what’s best for the taxpayers. His message mixes that with a possible presidential message targeting the mess in Washington.

The Democrats will hit him for falling short of his 250,000 job pledge, for gallivanting around the country to hobnob at soirees, for losing focus on the job of governing Wisconsin, and maybe even for not having a college degree and therefore hating education (his first-in-a-decade increase to the UW System notwithstanding…facts are never withstanding for the left).

That’s all amateur ball in today’s game of demographic-driven politics, and so is the kind of traditional messaging Mr. Walker’s team is running. You know, honest stuff like balancing budgets and fighting for responsible stewardship of taxpayer dollars. The three horsemen of Democrat cunning will have a core mission of microtargeting and exploding the margin in certain demographics, particularly doing so among single women, which looks to be the new Obama-era Democrat stratagem. They target, lie, divide, and too often conquer.

They’ll hit Mr. Walker on defunding Planned Parenthood in Wisconsin, shuttering abortion clinics, forcing women to have ultrasounds before ending a baby, repealing bonanzas for lawyers who get rich by suing employers (the left calls it rolling back equal pay laws), and other pablum peddled by the left. They’ll text, email, and phone those messages to their targeted demographics. That’ll drive outrage and it’ll drive turnout at the polls next Nov. 5th.

It’s a load of left-wing pablum indeed, but unfortunately that pablum works. In the era of Obama, lying, exaggerating, and deepening the political divide is what wins elections. Mr. Walker needs to sideline his presidential ambitions and prepare for the firestorm for which the left has been preparing since 2011.

Quote of the Day

“I believe very strongly that women should have the freedom to make their own healthcare decisions. What the governor has done is roll back  Wisconsin many, many years.”

-Mary Burke in the Maddow interview, presaging the tone and tenor of next year’s guv campaign.

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All hail King George

The finest ever blow us away with their tribute to George Jones

This isn’t a link, it’s simply my commentary that today’s country has too much rock and too few steel guitars. I miss the old days…15 years ago.