Editor’s note: Former State Sen. Butch Gautreaux addressed the Joint Legislative Committee on the Budget following the presentation of Gov. Bobby Jindal’s executive budget and the ensuing queston and answer session between legislators and members of the Division of Administration. Unfortunately, when the last legislator’s question was asked and answered, reporters exited the committee room, unaware that Gautreaux would testify against the controversial proposal to privatize the Office of Group Benefits, meaning his words got little play in the media.
Following is an exclusive reprint of his comments:
Although Governor Jindal has strived to bring transparency to the office of the Governor, the Office of Group Benefits (OGB) sale or its placement in the hands of a third party administrator is a case that denies the public, or for that matter even the legislature, the opportunity to see or understand what is being considered.
When news first came to light last year of an effort to capitalize on the large cash reserve, I called meetings of the Senate Retirement Committee to try to learn the rationale of the sale. I invited all parties including the governor, the commissioner of administration and others involved. Mr. Rainwater did attend the first two meetings but little was learned. When repeatedly asked by panel members why the sale was being considered, Mr. Rainwater was pat on his answer, never swaying from his statement: “the State should not be in the insurance business.”
Remember, the state set up a workers’ compensation company, LWCC in the early nineties that still exists today and seems to function well. The state set up Citizens in response to coastal residents not being able to acquire homeowners insurance. It’s had its problems but is still doing the job. Does Mr. Rainwater advocate getting rid of those two insurance companies?
We just learned last week that the Governor contracted with Morgan-Keegan to do an analysis on the feasibility of selling out or placing in the hands of a third party administrator the PPO for the Office of Group Benefits. As a member of the board of OGB I have not had an opportunity to see the final Morgan-Keegan document or anything else. I can only tell you a little history of a health insurance system that is the envy of the other 49 states. Louisiana has the only self-administered and self-funded health insurance for state workers and retirees. The plan provides competitive rates to members and to the state. Remember, the taxpayers pick up most of the cost. And unlike some other departments OGB has for the last seven years grown in becoming a model of what other states should emulate.
Mr. Rainwater likes to state that we have twice the number of employees in our health insurance department. Of course we do. We are the only state to administer its plan, and at a cost that is a lot cheaper than it can contract for.
Eight years ago OGB was in trouble for an assortment of reasons and something had to be done if the system was to survive. Governor Kathleen Blanco hired Tommy Teague to take over as the director and through his excellent management practices and leadership we saw a system that was wrought with problems and inefficiencies go from a $33 Million deficit to a $550 Million cash reserve. Let me say that I served on the board of directors during this transition from something very troubling to what has become a shining star. And then when Tommy resisted taking actions that would undermine the system, Governor Jindal summarily fired him.
We now have a premier public health insurance department for state workers that offers affordable premiums and industry-acceptable reimbursements to health care providers. This took a lot of talent. Mr. Teague negotiated with providers who previously were not interested in doing business with OGB. He promised them big changes in service and negotiated better discounts from them at the same time.
While at its worst, most hospitals and doctors did not want to accept the plan. But, at the last board meeting back in September it was reported that every hospital in Louisiana except one now accepts the plan as do most doctors and other providers.
Better discounts and other efficiencies of scale were building increased cash balances. At the final meeting of the last fiscal year the board had a motion on the table to reduce premiums which would have helped with the cost to the state during this fiscal crisis. That motion was met with a substitute motion to maintain rates until we knew how things would shake out with efforts by the administration to take the fund balance to fill a gaping hole in the state budget. The OGB monies are constitutionally protected from being raided as so many other department budgets were being raided at the time.
In the face of the board action, Governor Jindal announced a 5.6% increase in premiums effective July 1st of last year. This action was not only unnecessary but put an additional strain on the already stressed state general fund as the state pays on average 75 percent of the premium cost.
At the same time, it was announced that deductibles would hold over until January 1, 2012, with the effect of drawing down the balance of the cash reserves, placating the complaints of members who could ill-afford more deductions coming from their diminishing pay checks. But this was all part of the governor’s overall plan.
Again for January 1, 2012, the Governor announced and implemented another premium increase of 5.5 percent. Remember, we were in a position to reduce premiums when the plan to raid OGB was put together.
Speaking of transparency, it was indeed very clear what the plan was. By implementing the unnecessary increases in premiums, further increases would be less of a shock to the members and you who must somehow balance the state budget. Experts are telling us that the private insurance company will have to ease in another increase of roughly 10 percent to meet the needs of executive compensation, marketing, stockholder dividends, profit, taxes and other expenses we don’t currently have at the not-for-profit OGB.
Our own actuary gave a figure of $97 million in additional costs to the taxpayer for the July 1 premium increase, coupled with the member deductible holiday through the calendar year. Since that time, there has been another unnecessary premium increase to the taxpayer and the members.
This privatization will be very costly to the taxpayers of Louisiana, but then we get to fire 177 rank-and-file state workers to counter the hiring of former chief of staff Teepell’s family members and all of the politically-connected, deposed elected officials over the last four weeks, most at six figure salaries.
You only need to follow the dollars to understand why the Governor wants this to happen. Thank you for your attention.
Light will be the only defense against this backward move. I hope the Legislature will see that OGB is a Trust for the Employees of the State of Louisiana. It was private before the work was brought in house and the rewards were given to the State. Louisiana is in the Health Care Business
because we deserved quality Health Care and fair treatment. Now that the market recognizes our true worth they want it. No private TPA has been able to provide the services of OGB PPO at the cost of doing business. What Happened to the bidding process anyway?
Many heartfelt thanks go to Senator Gautreaux for remembering the State of Louisiana past, present, and future employees. It is much appreciated!
It is too bad that the administration wants to follow the political rut and pride themselves on actually eliminating over 16,000 jobs…puff out that chest! It is only Louisiana citizens that you are putting out of work…gosh, how does that measure up with your local job opportunity plan?
Bring the HMO, along with every other administration-backed plan (including Louisiana First that LSU has along with much of the Legislature) back to the OGB workers to handle. Allow the OGB knowledgeable staff to show you how the best claims processing and customer service staff in the world get the job done. There is no logic and only dreaming that TPAing the PPO would SAVE the State $26.5mil in a year. Try letting OGB do the TPA work for other States that would love to be self-administered…let’s talk income!
This sort of hateful move not only to OGB, but several other Agencies, will do nothing to provide added funds for the State of Louisiana, anymore than all the proposed hoopla on the retirement plan will decrease the State of Louisiana’s obligation to fund their liability to the retirement program.
Back to the drawing table Administration. Legislators…dig in and read what this administration wants to do. Do not just follow the party line or be afraid you might not get on a certain committee next year. LEARN and help Louisiana and America get back on track.
Sick plan for a sick state in a sick economy–and getting sicker. I need some Pepto or Exlax.
Senator Gautreaux continues to be the voice of reason even out of office. Unfortunately, ideology is what matters in this administration, not reason.
The degree of demagoguery and the selective use or omissions of fact in this piece is astounding. Where to start?
Let’s start by getting rid of the red herring. Comparing a state-run insurance administrator such as OGB to Citizens is apples and oranges. Private insurers are not willing to insure some properties at a rate policy-makers think they ought to be, so that’s why we have Citizens. But even high-risk clients are quite willingly insured by the state’s non-government-administered plans, as well as any others, so why should we have, in essence, a government corporation do something that is done well outside of government — and more cheaply that government.
Oh yeah, rates for the state administered plan, the Preferred Provider Organization, have averaged for years over 5 percent higher than the plan chosen by almost three-quarters of Louisiana state employees and retirees, the Health Maintenance Organization, for essentially the same benefits (required by law). They would have had higher gaps for the past decade but the Division of Administration most of those years turned increases down or pared them back. These were requested by the OGB Policy and Planning Board, of which Gautreuax was a member. So he tries to stick it to ratepayers and taxpayers for years, in order to build up a surplus far larger than there is today (taxpayer and ratepayer money sitting idly), and now he claims he’s a friend of theirs compared to DOA?
The claim that the PPO provides cheaper and better service is ludicrous for anybody who can read the published OGB rate tables. Year after year, as noted above, PPO rates have been higher than the HMO or other plans. And recently it was revealed that incompetence at OGB caused overbillings that could cost millions. That’s really the mark of a well-run organization, isn’t it?
Several times I have challenged members of the OGB Board to answer the following questions. I repeat them here:
Louisiana is only one of two states that even has part of these benefits provision run by the state. If this model is so good and so cost-effective, why don’t more states follow it?
Repeating that question, why is it that most Louisiana employees and retirees choose the HMO and similar smaller plans rather than the PPO? If the PPO plan is so good, why even have the others?
Because of the pricing differential born of the inefficiency in government operations, the PPO costs contributors an estimated extra $21.2 million yearly, which is fine if they want to pay more for the same service. But the problem is, because of the taxpayer match, this costs non-state households an extra $33.3 million annually, and the extra employees the state is forced to carry to run its own plan is another $10.2 million a year. (If you’re keeping score, this is about $65 miilion a year of taxpayer and ratepayer dollars wasted.) Why should the state absorb these extra, unnecessary costs?
Louisiana’s cost of administreing all plans is over $70.6 million using 309 employees, of which about $39.8 million is directly attributable to the PPO. Another way of putting it is about 62,000 lives are enrolled under the PPO, at an average member administrative cost of $64.19, while the remainder under other plans cost $18.90. Why should taxpayers willingly pay for administering something at 3.5 times more than they should?
Gautreauax’s special-interest-friendly, big-governmenmt-loving philosophy was soundly rejected by voters both in his pathetic bid for the state’s second spot and generally in last year’s elections. Understanding the extra costs we have to carry because of the way OGB self-insures explains why.
I am so glad that you got all that out of your system jeffsadow. Sadly most of it is a crock, but you would not know the difference. Truth never seems to be an interesting factor in these situations. There are always erroneous comparisons to parts of OGB that are apples and oranges, so at least you are corrrect. For many years things have had to be done at OGB NOT because the staff or board thought it was the best avenue for the members, but because DOA directed that they be done. OGB has known for years that premium increases were not needed due to wonderful planning; however, DOA had their plans too. Reduce or eliminate deductables…oh, no, can’t be done. That would move HMO folks back to the PPO and how can it be wiped out then?
All of these various reports that turn out NOT to advise getting rid of ANY part of OGB are paid for by the OGB budget…now that is crazy and wasteful. Have you really checked into other state insurance plans? Doubtful or you would be aware that the private sector has placed such a financial chock hold on the states to keep outsourcing their insurance needs that they are unable to develop the self-administered program that Louisiana has. It would cost to darn much. It is true…check it out. The outsourcing that is being done currently is because the administration wants it that way, not because it is a better choice. Look into the Vantage program in the northern part of the state. There is not a person in the PPO that would want to change, but over many years it has been a target of elimination.
The governor and his administration has been out to rid itself of OGB for several years. Since he was unsuccessful on his first attempt — when OGB won a competitive bid for its own PPO, he continues on his goal. How do you kill an organization like OGB?
1. Cut off its head — (fire Tommy Teague) — check.
2. Decrease employee morale — (threaten employment, retirement, etc) — check
3. Tie its hands — (hiring freeze, inability to replace personnel, reduce other resources) — check
4. Increase expectations — (require research, implementation, etc. within unrealistic time frames) — check
One way or another Jindal will be the architect of OGB’s destruction (and brag about it) and the state retirees, employees and taxpayers will all pay a higher price.
Problem is — it’s not just the PPO that’s on the hit list. It’s just the first step in divesting the state of the entire agency that has proven to be a good steward of the premium dollars — not just in the PPO, but for other health plans and services for which they have responsibility. It will be difficult to oursource all of its functions and still only spend 5% in overhead. But that’s where we’re headed.
Butch, I don’t know if you’re shooting straight on OGB or not, but I do remember that you were on board to rape, pillage and plunder the state employees’ retirement system. I would certainly be entertained if you could be a thorn in Booby’s foot in his efforts to destroy State Government–well except for those protected by the key to the governor’s office who don’t appear to be required to follow any ethical anything.
And now, immediately after his right-hand man, with drink in hand, comes out for stricter ethics enforcement. This from someone who recently blew an alleged .17% BAC, which would be cause for termination for any other currently serving state employee. Talk about the pot calling the kettle black.
Anyway, Butch, if you’d show the same passion against the destruction of the employees retirement system because the state will not pay its constitutionally-required funding to eliminate the UAL, it would be appreciated. Thank you for your time.
Just to be fair Mr sadow, those higher premiums are paid by 62,000 actual state employees and retirees. the 2/3 vendor has 100,000 family members.
So the numbers are really a 60/40 split. PPO is a great control group and keeps the rates honest. Why in the world would 62,000 actual state employees chose to pay higher premiums for the PPO when the 2/3 vendor is cheaper? Go figure.
They trust their own to make this complicated system work in light of a changing health care environment.