Gov. Bobby Jindal’s Privatization Express keeps rolling along. This time he has set his sights on one of the most financially stable state agencies, the Office of Group Benefits (OGB).
One has to wonder however, if his motivation is really in a more efficient, more streamlined state government or does he perhaps have an eye on OGB’s $552 million surplus as a means of making himself look like a financial genius by using the money to plug one-third of the looming $1.6 billion deficit.
A couple of coups like that, coupled with the recent dramatic upturn in the price of a barrel of oil, which always enriches the State Treasury, and Jindal the Boy Wonder would take on the aura of financial wizard and (he hopes) give his presidential aspirations a needed boost with the national media other than Fox, Rush Limbaugh, and the Washington Times, who already adore him to the point of nausea.
The deadline to respond to a Request for Proposals (RFP) for the services of “a qualified financial adviser” preparatory to the private takeover of OGB is Monday with finalist interviews scheduled to take place a week later, on March 14, according to DOA’s Feb. 4 RFP.
The financial adviser to be selected will be charged with assessing the market value of the tangible and/or intangible assets of OBG and to negotiate for and on behalf of OGB to help the agency “explore alternative methods of providing health coverage through contracts” with a private administrator, the RFP said.
In March of 2010, it was announced that the Office of Risk Management would be taken over in phases by F.A. Richard and Associates (FARA) of Mandeville at a cost to the state of $68 million. The Worker’s Compensation section was transferred to FARA last July and the last sections are scheduled for transfer by July of 2013.
Proposals were received for the privatization of the state’s Buildings and Grounds Department but each of those proposals were ultimately rejected.
There appears to be more opposition to the privatization of OGB because of its financial stability and its low (4 percent) administrative costs. State Sen. Butch Gautreaux (D-Morgan City) has gone on record as opposing the privatization of OGB.
“I am very concerned about the governor’s efforts to sell off OGB,” Gautreaux said. “I sit on the (OGB) board and attend the meetings. We’ve developed a reserve of over $500 million and again the governor is looking at raiding those funds for short term and recurring expenses. This will be a catastrophic move,” he said.
OGB presently maintains a self-insured and self-administered health and accident benefit plan (PPO plan) with its own network of contracted providers. OGB also has a contract with Blue Cross/Blue Shield of Louisiana to administer a self-insured HMO plan and United HealthCare administers a self-insured consumer-directed (high deductible) health plan with a health savings account. Vantage Health Plan is also contracted with OGB for a pilot program to provide a fully-insured medical home HMO plan in the northeast region of the state, the RFP says.
In addition, the LSU System, through an interagency agreement with OGB, administers a separate consumer-directed health plan with a health reimbursement account available to employees and retirees of LSU and the Louisiana Legislature.
The RFP also stipulates that the financial adviser provide recommendations to OGB for contracting in light of the assessment and negotiations and will also assist in the drafting and final execution of any contract resulting from the assessment and negotiations. The financial adviser who is ultimately chosen will also be called upon to provide testimony before any committee of the legislature conducting hearings on the proposed privatization.
Those submitting proposals will be required to have a minimum of 10 years experience in the valuation and sale of entities in the health insurance market with enterprise values exceeding $150 million, the RFP said.
OGB ended Fiscal Year 2009-2010 with total assets of $552 million, including $529.5 million in cash and $22.5 million in premium receivables, according to the RFP. Such a financial windfall would be tantamount to a Jindal slush fund.
If OGB is ultimately privatized, the state would enter into a contract with an administrator much as it did with FARA for the ORM privatization. The state would pay the amount stipulated in the winning proposal and in return the administration would have access to the $552 million surplus, ostensibly to help plug an anticipated $1.6 billion budget deficit.
Like the proposals for privatization, when that RFP is issued, the proposals by financial advisers submitting proposals would be graded on a point basis. In the case of the financial advisers, a 1,000-point system will be employed with service approach and coordination strategy having a potential maximum of 350 points. The highest possible score for qualifications and experience of the proposer will be 300. The qualifications and experience of assigned staff carries a maximum possible score of 200 and cost of services 150 points.
No timetable has been set for the issuance of an RFP for the actual privatization of OGB.
The agency has more than 450 employees who could be affected by the privatization through the loss or interruption of retirement and their own health benefits.