What happened to $500 million?

By By Jim Beam / American Press

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


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 jbeam@americanpress.com.