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State May Begin Self-Insuring Workers in HMOs

TALLAHASSEE -- Looking at potentially tens of millions of dollars in savings, Florida lawmakers this week could move toward restructuring part of the health insurance program for state employees.

A joint House and Senate budget committee Friday will consider setting aside more than $19 million that could be used to begin self-insuring HMO coverage. That amount would be a down payment toward what could turn into far-larger savings.

Under the concept, the state would take on the financial risks of insuring workers, while contracting with HMOs to administer many of the day-to-day operations of the program. Currently, HMOs get paid to take on the financial risks, along with handling the operations.

The key: A consultants' report early this year said the state could save as much as $109 million over a two-year period by self-insuring. It said the move would reduce HMO costs built into the current system and also give the state more flexibility in running the program.

"The state group insurance program insures a large and stable workforce with relatively predictable expenses,'' John P. "Jack" Miles, secretary of the state Department of Management Services, said in a letter to legislative leaders early this year after the report was finished. "As such, self-insuring appears to be a sensible solution to manage the cost of providing health care to our employees.''

The joint Legislative Budget Commission will take up the issue Friday, as it considers a proposal to set aside $19.7 million in reserves.

If okayed by the LBC, the ultimate decision about whether to self-insure would depend on the result of negotiations between the Department of Management Services and HMO contractors, and the savings those talks produce.

House Appropriations Chairwoman Denise Grimsley, a Sebring Republican who also chairs the Legislative Budget Commission, said in an e-mail that the proposal is "predicated on the assurance of ultimate savings, a concept which I support.''

Of the $19.7 million, all but about $600,000 is estimated to be needed to pay HMO contractors, which would do such things as handle claims and oversee provider networks. The move to self-insurance could occur in 2012.

Michael Garner, president of the Florida Association of Health Plans, said his HMO industry group has not taken a position on self-insuring the program. He said the group has members with different stances on the issue.

The concept of self-insuring is nothing new: The state insurance system offers HMO and preferred-provider organization coverage to workers and has long self-insured the PPO portion. Blue Cross and Blue Shield of Florida has a contract to administer the PPO plan.

Also, similar self-insurance plans are relatively common for large private corporations.

A potential downside to self-insuring is that the state would be liable for large, unexpected health costs. But Buck Consultants, which helped put together the report that went to legislative leaders early this year, said the benefits of self-insuring far outweigh potential costs.

"For a group the size of the state of Florida Employee Group Health Insurance Plan, there is no compelling financial advantage to maintaining fully insured HMO plans,'' the consultants wrote.


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