When it comes to twisting his stories and changing direction in mid-testimony, Commissioner of Administration Paul Rainwater, it seems, has no peer.
In yet another legislative committee hearing on the proposed sale/privatization/contracting for a third party administrator (TPA)/hybrid of the Office of Group Benefits (OGB), this one by the Senate Insurance Committee, Rainwater again altered his version of the truth that just doesn’t quite square with public comments he has uttered in the recent past.
Rainwater also got a surprise when his appointee as GEO for OGB admitted that if things remained the same as they are now, he could not reduce his staff. Rainwater has testified before two different committees that the sale/privatization of ORM would reduce the number of employees at OGB by 149, or by about half.
On Tuesday, Rainwater told Insurance Committee Chairman Sen. Dan Morrish that there was no plan to use any portion of the OGB $520 million surplus for the state general fund, nor would any private company that takes over the operations of the agency have access to the fund balance. “That fund is there for the state to pay claims and that’s what it’s going to be used for,” he said.
Barely three weeks ago, Rainwater said that the OGB surplus would be “an attractive selling point” because the private company that ultimately purchases the agency would not have to dip into its own capital to pay claims initially.
And while he steadfastly maintains that OGB is not for sale, his own office’s press release of April 26 describing his appearance before the Senate Retirement Committee repeatedly alluded to his testimony on the “potential sale and privatization of the state’s Office of Group Benefits” and of the procurement of a financial advisor to help the state “evaluate the potential sale of OGB…”
The first paragraph of Rainwater’s press release said that he testified before the Retirement Committee “about the potential sale and privatization of the state’s Office of Group Benefits.”
The second paragraph quoted Rainwater as telling the committee, “The simple fact of the matter is that a sale and privatization of OGB will have no negative impact for those covered. Let me say that again: a sale and privatization of OGB will have no negative impact for those covered.”
If that is not enough, that same press release from his office quoted him as testifying before the Retirement Committee, “The procurement of a financial adviser to help the state evaluate a potential sale of OGB was undertaken in accordance with applicable law.”
Morrish on Tuesday asked, “Is this a sale or a privatization?”
“We’re attempting to bundle our HMO and PPO.”
“Is it a privatization or a management contract?” Morrish asked again.
“It’s a privatization with a five-year contract. We’re taking OGB out of the day to day business of running an insurance company,” Rainwater said.
“We’re not selling OGB,” he said. “We’re not giving up the right to negotiate a contract. This is something that’s never been done before. It is privatization, but we’re not selling OGB.”
A brief but puzzling exchange ensued when Morrish commented that he had not seen the RFP (request for proposal).
“The RFP is not written yet,” Rainwater responded.
The RFP for a financial adviser to conduct an assessment of OGB’s value was issued last Friday giving bidders a deadline of June 6 in which to submit proposals to “assess the market value of the book of business and services provided by OGB and assist in the formulation of alternative methods of benefit delivery.
An earlier RFP was abandoned when the only bidder, Goldman Sachs, who helped in the crafting of the document, was the only bidder but could not agree to a demand that DOA hold Goldman Sachs harmless in the event of litigation.
Throughout the latest RFP, there are references to those submitting proposals having experience in the sale of health insurance entities and of track records in past sale efforts.
Sen. J.P. Morrell (D-New Orleans) asked Insurance Commissioner Jim Donelon about the impact on the state insurance industry if the same company ended up as the third party administrator (TPA) for both the state’s HMO and PPO.
“After Hurricane Katrina visited us,” Donelon said, “Blue Cross/Blue Shield went from having 40 percent of the insurance business in Louisiana to 70 percent. I have tried every way I know how to stop that trend. Blue Cross already has the state’s HMO and PPO, that could be a problem. I spoke to Angel (former Commissioner of Administration Angele Davis) about that when DOA awarded the HMO to Blue Cross over Humana and of course, that’s being litigated right now in the court of appeal.”
Sen. Gerald Long (R-Winnfield) asked Rainwater how he arrived at a value of $150 million for OGB.
“OGB collects $1 billion a year in premiums and currently has a $520 million surplus and we took variables of those figures and arrived at a price of $150 that we expect a company might pay us to manage that volume,” Rainwater replied.
Sen. Eric LaFleur (D-Ville Platte) asked Rainwater if the $150 million was recurring or one-time revenue and Rainwater admitted it would be a one-time payment. “But there would be a $10 million-a-year savings in staff reduction savings,” he said.
“Doesn’t the $500 million surplus help the state?” LaFleur asked.
“It does, but we need some balance,” Rainwater said.
“Isn’t what he’s supposed to do,” LaFleur asked, referring to Scott Kipper,
newly-appointed CEO of OGB following the April 15 firing of Tommy Teague
“It is. That’s why we brought him in.”
LaFleur then asked Kipper, “Is that impossible for you to do, to streamline the agency and make it more effective?”
“It’s not impossible,” Kipper said. “The trick is to try and get an apple-to-apple comparison in order to get the reserve where it should be.”
“What is a good reserve?”
“That’s a good question.”
LaFleur then dropped a bombshell when he asked Kipper, “Let’s assume this RFP doesn’t go anywhere and we’re right back where we are right now, who…how many people would you cut from OGB?”
“If we continue to operate as we do now, there would be no significant cuts,” Kipper said. “There’s not a lot of excess now.”
Rainwater, visibly upset at Kipper’s answer, interrupted to say, “The only way to reduce the number of employees by 149 is to privatize.”


