Last Modified: Thursday, May 29, 2014 10:18 AM
A $500 million health care trust fund for state workers, retirees and their families is almost depleted. It’s another questionable outcome for one of Gov. Bobby Jindal’s decisions to transfer government operations over to private companies.
Legislative Auditor Daryl Purpera and the Legislative Fiscal Office agree that if changes aren’t made the reserve account could be down to $55 million by the end of the year and be gone by April of 2015. Purpera said depletion of the trust fund has been caused by a nearly 9 percent reduction in premiums over two years and rising costs of medical care.
The 250,000 people who receive health care coverage through the state Office of Group Benefits paid the premiums that helped build up the trust fund. Now that it is almost empty, they will be asked to replenish some of the funds. They will do it by paying 5 percent higher premiums effective July 1, using less-costly generic drugs, getting pre-authorization for certain medical services and accepting standardized benefit limits.
How did the OGB situation get to this low point? We have to go back to June of 2011 to understand how it happened. That is when the Jindal administration started talking about privatizing the health care agency.
The biggest worry workers and retirees had back then was what might happen to their $500 million trust fund. It didn’t help that a report detailing the privatization plans was kept secret at the start.
Some of the OGB insurance plans were already being run by private companies in 2011. Jindal’s proposal was going to affect about 62,000 more employees, retirees and their dependents. The governor’s goal was to cut the 300-employee workforce at OGB and generate $10 million in annual savings for the state.
In 2011, Purpera reviewed the issues that he said should be considered by lawmakers before any decision to change OGB’s status was made. He said the privatization could cause higher insurance premiums because a private company would have marketing costs, premium taxes, profit margins and reinsurance costs that OGB didn’t have.
Purpera’s report said the state and the Legislature could also lose control over costs, benefits and insurance plan changes.
The issue of privatizing OGB continued to make news throughout 2011 and during the first half of 2012. The target date for putting a plan into action was Jan. 1, 2013.
The state raised premiums twice in 2011, even though the board of OGB said it wasn’t necessary because of the $500 million trust fund. Critics of the price hikes said the administration was trying to improve the bottom line of OGB to make privatization look more attractive.
After raising premiums twice in 2011, the administration surprisingly cut them by 7 percent on July 1, 2012. The reduction was going to continue until the end of 2013. It was announced that state employees and retirees would be paying $10 million less in premiums in the last six months of 2012 and $19.5 million less during 2013. The premium reduction may have been an effort to make the privatization effort more acceptable to the people covered by OGB.
The Jindal administration announced in July of 2012 that Blue Cross and Blue Shield of Louisiana was chosen to run OGB. The company was going to receive $37.8 million a year to serve as administrator.
Some legislators were still skeptical of the decision, and two of their committees were going to have to approve the deal. Lawmakers who had reservations said the office was running smoothly and claims were being handled efficiently. State workers and retirees were also satisfied with the service they had been receiving.
Approval by the Senate Finance Committee and the House Appropriations Committee was delayed for a week. The Associated Press said Kristy Nichols, the governor’s commissioner of administration and chief budget adviser, shelved a vote on the contract when it became clear she was short of the votes needed. A day later, Reps. Cameron Henry and Joe Harrison, two Republican opponents of the contract, were removed from the Appropriations Committee.
The two lawmakers who replaced them voted for the contract that their committee approved 16-10. The Senate Finance Committee voted 10-3 to back the idea. The AP said the governor hadn’t planned on seeking budget committee approval, but the state attorney general’s office said the contract required it.
So the deal was done, and nearly a year and a half later questions have arisen about the financial situation at OGB.
Each time the privatization of OGB was discussed, those served by the agency worried their health benefits would be cut, their premiums increased and their $500 million trust fund raided. As they feared, it’s happening.
Not to worry, says Nichols. It has become a standard reply anytime a Jindal program of any kind comes under fire.
Nichols said some of the trust funds will be restored with higher premiums and savings made through changes in medical services. Susan West, OGB’s chief executive officer, like Nichols, said everything is going to be OK. But will it be?
You can’t help but think of that Bobby McFerrin song whenever a situation looks grim and someone in the Jindal administration tells you to look on the bright side. The song is, “Don’t Worry, Be Happy.”
Jim Beam, the retired editor of the American Press, has covered people and politics for more than five decades. Contact him at 494-4025 or firstname.lastname@example.org.
Posted By: charlie On: 6/7/2014
I blame the democrats for letting him run unopposed, he should have never(Jindal) been Governor to start with, he's raped LA. I was one of his state employee victims of reduced work force, forced into early retirement, no republican should ever be handed a seat unopposed, that gives them an open door to our monies and believe you me they will steal us blind, just take a look at the State and the fix Jindal has us in!!!
Posted By: Kay Prince, Ruston On: 6/1/2014
Title: What happened to the $500 million?
Thank you, Jim Bean and the American Press for this very important article! The underlying message is that Jindal has given a "death sentence" to Louisiana's citizens who built the OGB's $500+ million for future health care costs. He is obviously more interested in the bank accounts of the 1% than he is of the health care of 65,000+ dedicated state employees, educators, and retirees who thought they were protecting their future health care when they created the self-insured OGB group medical plan and the $500+ million.
Posted By: T. Jackwagon On: 5/31/2014
Title: No more Jindal leadership please...
Broken promises and stolen money is Gov Jindal's legacy. He takes but does not put back. His career at our expense... Disgusting leadership.
Posted By: Paul Frank On: 5/30/2014
Looks like Jindal may have to suck it up and realize all the grandstanding for state health care may have blown his chances for that cabinet post he was hoping for. I'll bet a five dollars those insurance companies were already lining up to feed at the 500 million dollar trough at the same time he was demonizing the "Affordable Health Care Act". Big time are PAC's are itching for a poster boy like Bobby to represent the privileged few while posing as the "Great Crusader" for poor, hard working constituents who trust in his Harvard education to guide them through the darkness of "Big Government". It's time to look at politicians for what they are, opportunists looking for the next sound bite to sway the electorate into thinking they have their interests at heart. Time to wake up folks. There may be a new fiddle player on the bandstand but it's the same old "Two-Step"