SPRINGFIELD -- State officials said Wednesday they will proceed with controversial new health insurance options for state employees despite a legislative oversight panel’s vote aimed at stopping the move.

SPRINGFIELD -- State officials said Wednesday they will proceed with controversial new health insurance options for state employees despite a legislative oversight panel’s vote aimed at stopping the move.


The Commission on Government Forecasting and Accountability adopted a resolution saying the state should not expand self-insurance health care options.  Supporters said hat would stop the changes from being implemented because one of the new health insurance options is a self-insured open access plan.


However, both Gov. Pat Quinn’s office and the Department of Healthcare and Family Services said COGFA doesn’t have the legal authority to adopt the resolution.


“We are moving forward,” said Quinn spokeswoman Brie Callahan.


Even Sen. Jeff Schoenberg, D-Evanston, a co-chairman of COGFA, said the commission “overstepped its legal authority.”  Schoenberg voted against the resolution.


“The view of the attorney general’s office is that the ship has long sailed,” Schoenberg said.


Attorney General Lisa Madigan issued an opinion last week saying COGFA cannot block individual health insurance contracts.  She said the commission could only set broad policy about whether or not Illinois should be involved in self-insurance.


With self-insurance plans, the state assumes the risk of paying claims.  Under fully insured plans, an insurance company assumes that risk.


COGFA unconvinced


DHFS put state employee health insurance contracts out for bid earlier this year.  Bids from two longtime HMOs –Health Alliance and Humana – were deemed too costly and rejected.  To replace them, the state selected HMOs offered by Blue Cross Blue Shield and an open access plan offered by PersonalCare.  An OAP from HealthLink will also be offered.


DHFS said the state will save $1 billion over the next 10 years by making the switch.  Even after a four- our meeting Wednesday to review financial details, however, many members of COGFA were unconvinced.


“We’re going to have our staff analyze (the numbers) and see if there is savings,” said Rep. Raymond Poe, R-Springfield.  “I don’t think there’s too many (COGFA members) who think there is a savings right now.  If there is no savings, we should start over.”


“There’s a proposal put forth on some pretty dubious assumptions that there are going to be cost savings to the state,” said Sen. Matt Murphy, R-Palatine, author of the resolution to block the changes.  “I’m not convinced there are savings in there.”


Murphy called it “obviously disappointing” that DHFS is going ahead with the insurance changes despite COGFA’s vote.


“With that approach, it is more likely there will be a lawsuit,” Murphy said.


Health Alliance assessing options


That lawsuit is likely to come from one or both of the rejected insurance groups. Health Alliance previously said a lawsuit was likely if the state proceeded with the changes.


Health Alliance CEO Jeff Ingrum said Wednesday the company will review its options.


“We’re not exactly sure what we are going do,” Ingrum said when asked how the company would respond if the state went ahead with the changes.  “We will undertake what has transpired (Wednesday) and decide whether or not we need to take further actions.”


At the start of the COGFA meeting, Schoenberg flatly said, “I think we all understand this will be litigated.”


Murphy said his goal was to have DHFS put the insurance plans out for a new round of bidding.


“I think it would be in the best interest of the state and their employees and taxpayers if it was rebid,” Murphy said.


Callahan said it's important for the contracts to proceed so the state can preserve its ability to obtain competitive bids.


"The reason that process exists is to produce a fair, competitive and apolitical result -- a result that isn't based on individual (lawmakers) not liking the vendor that got picked,” Callahan said.  “Why would a vendor bid competitively, or bid at all, if they knew that at the end of the process, we would just go, 'Oh, well, we didn't like the result, so we'll start again?'"


Consultants: Savings real


Consultants hired by the state said the savings are real.  Todd Swim, a partner and health actuary with Mercer, a consulting firm working for the state, said 96 percent of large U.S. employers of 20,000 or more self-insure for health coverage, in part because they don't want to pay avoid paying the extra administrative cost and profit built into the rates of traditional health coverage from an insurance company.


He said many employers also self-insure because they want to be free of health-insurance requirements at the state level.  But he noted that the state's self-insured plans do comply with all state insurance mandates.


Swim said Illinois state government provides health insurance to a total of 420,000 people, though the total covered by the managed-care contracts in question is smaller. He said Illinois is behind most other states in providing incentives to get more people in its health plans to move into "open-access" plans and other self-insured arrangements.


"There's a reason why the state should exercise its critical mass and its clout in the marketplace to get the most cost-effective funding, which is on a self-funded platform, unless somebody comes in with a really good fully insured rate, which Blue Cross did," Swim said.


Swim said the prevalence of HMOs in the American workplace has dropped by 42 percent in the past 10 years as patients opt for health plans that offer more freedom of choice regarding health-care providers.


The state’s current open-access plans have been more expensive for state government than traditional HMOs in the past because the OAPs tended to attract older, sicker patients who wanted to retain some level of coverage while going outside the local network for care.


But he criticized Health Alliance for claiming the OAPs would remain more expensive for the state under the new contracts.


"For somebody to grab that, especially Health Alliance, who knows better -- they know the numbers -- for them to pretend there's this big cost difference, it's disappointing," Swim said.


Under the new contracts, most Health Alliance HMO members will enter one of the OAP plans -- plans that are cheaper for the state to use, Swim said. With an infusion of younger, healthier patients, total costs to the state would go down, he said. As a result, individual workers, dependents and retirees would face little, if any, additional cost — especially if they use "Tier 1" doctors.


Doug Finke can be reached at (217) 788-1527.  Dean Olsen can be reached at (217) 788-1534.