Louisiana Voice

A Louisiana Attorney General’s opinion released Friday has accused the administration of Gov. Piyush Jindal of attempting an end run around the legislature in its efforts to privatize the Office of Group Benefits (OGB).

Meanwhile, another state prison is abruptly closed by Jindal.

The eight-page opinion, written by Assistant Attorney General Michael J. Vallan, says that the proposed privatization of the Office of Group Benefits and the ensuing contract with Blue Cross/Blue Shield of Louisiana must be approved by the House Appropriations Committee and the Senate Finance Committee, as well as the Office of Contractual Review.

But don’t expect Jindal to capitulate too easily, for while the opinion, which boiled down to a interpretation of under which state statute the privatization action was taken, is just that—an opinion. It has no force of law and the likely action to be taken by Jindal and the Division of Administration (DOA) is to simply ignore it and proceed as planned.

The only recourse in such a scenario, would be for the legislature to file suit against Jindal to get a determination of which statute should apply in the privatization process—one which effective bypasses legislative authority or one which specifically requires approval of the two committees.

The requirement for approval of the Office of Contractual Review may as well have been deleted from the opinion since the office is a part of DOA and answers directly to Commissioner of Administration Paul Rainwater, making that agency’s approval a virtual given.

The Division of Administration, through OGB issued a request for proposals (RFP) earlier this year and on April 30 issued a Notice of Intent to Contract (NIC) for Administrative Services Only (ASO), meaning for the awarding of a contract to a third party administrator (TPA) to take over the administrative duties for the state’s Preferred Provider Organization (PPO) plan, the High Deductible Health Plan (HDHP) with Health Savings Account (HAS), and the LaChip Affordable Health Plan (LaCHIP).

Blue Cross Blue Shield of Louisiana (BCBS) was already serving as third party administrator for the state’s HMO coverage for state employees and their dependents through OGB and on July 20, OGB issued a report and recommendation to the Evaluation Committee in which it proposed awarding the PPO, HDHP, HAS and LaCHIP business to BCBS as well.

That recommendation was approved by the State Civil Service Commission on Aug. 1.

State Rep. Katrina Jackson (D-Monroe) two days later requested an expedited legal opinion from the attorney general’s office based on her belief that the legislature had to sign off on the awarding of such contracts.

Vallan, in his opinion, said that Louisiana Revised Statute 42:802(B)(8)(b) “clearly provides that any such contract shall be subject to review and final approval by the appropriate standing committees of the Legislature having jurisdiction over review of agency rules by OGB as designated by (statute), or the subcommittees on oversight of such standing committees, and the Office of Contractual Review of the Division of Administration.”

“It is our understanding that the House Appropriations Committee and the Senate Finance Committee are the appropriate standing committees having jurisdiction over OGB rules.

“Therefore, pursuant to the plain language of …42:802, it is the opinion of this office that any contract negotiated by OGB pursuant to the authority granted by …42:802(B)(8) shall be subject to review and final approval by the House Appropriations Committee and the Senate Finance Committee.”

The entire issue hangs on which statute was used in the issuance of the NIC and the subsequent awarding of the contract to BCBS.

“According to OGB,” Vallan said, “the contract at issue was not negotiated pursuant to the provisions of …42:802(B), but was instead negotiated pursuant to the authority provided by Louisiana Revised Statute 42:851.”

While acknowledging that 42:851 does not require legislative approval of contracts, Vallan said, “Our reading of …42:851 is that it applies to situations where a particular state governmental or administrative subdivision, department, agency, school system, etc., intends to procure private contracts of insurance for its respective subdivision, department or agency.

“We do not believe that …42:851 provides OGB with the authority to enter into the proposed contract with BCBS. We are of the opinion that such authority is clearly granted by …42:802. An interpretation of both …42:802 and 42:851 authorize OGB to execute the proposed contract with BCBS would render the provisions of (the two statutes) duplicates of each other and their provisions superfluous and/or meaningless. Such an interpretation should be avoided.”

Vallan said that by enacting 42:802, it was clear that the legislature “has expressed its desire that contracts governing the provision of basic health care services, as well as certain other related contracts be subject to review and final approval by the legislature.

“To interpret …42:851 as offering some sort of alternative route to execute such contracts, thereby escaping legislative oversight, appears to be contrary to the logic and presumed fair purpose the legislature had in enacting …42:802.

“In summary, it is the opinion of this office that the proposed contract between OGB and BCBS is a contract negotiated pursuant to the provisions of …42:802. As such, the contract is subject to review and final approval by the appropriate standing committees of the legislature having jurisdiction over review of agency rules by the Office of Group Benefits.”

Almost lost in all the legalese is the fact that if Jindal’s privatization plan is ultimately approved—by the legislature or by the courts—121 state employees who show up each day to see to it that the medical claims of more than 100,000 state employees, retirees and their dependents are paid in a timely fashion will see their jobs vanish.

Jindal sees privatization through rose-colored glasses—provided him, no doubt, by generous corporate campaign contributors—despite the obvious pitfalls.

Take the Office of Risk Management (ORM), for example. It was the first state agency to be privatized and the company that the state paid $68 million to take over the TPA functions. The takeover was to occur in phases, with the worker’s compensation section one of the first to go and the road hazard section scheduled later this year as the last section to go over.

One of the conditions of the privatization contract was that the TPA absorb displaced ORM employees for a minimum of one year.

In only about eight months after taking over ORM in September of 2010, the contractor, F.A. Richard and Associates (FARA) of Mandeville, was back, asking for an amendment of a tad over $6.8 million to its contract, bring the total to just under $75 million.

Because the request was for an additional 10 percent, legislative approval was not necessary; there is a provision that contractors may get a one-time bump of 10 percent without legislative concurrence.

Legislators were not too happy to learn of that provision but in less than a month, FARA sold out to a company in Ohio which in a matter of only a few more months, sold out to a company in New York.

But here’s the clincher: the contract with FARA contains a clause which specifically says that its contract with ORM may not be transferred or reassigned without prior written approval. When DOA was asked for a copy of the written approval to transfer the contract to each of the out-of-state companies, the response was no such document existed.

So, because of not one, but two flagrant violations of its contract for privatization, ORM is being run by an out-of-state corporation even before all the ORM sections were phased into the contract.

And where are those former ORM employees today? Well, it seems, only a handful of former ORM employees remain there.

OGB remains on the privatization chopping block despite the encouraging legal opinion of the state’s highest legal office. It remains to be seen how it all will play out.

Meanwhile, Jindal, having failed to privatize state prisons as he wished, is simply closing facilities. J. Levy Dabadie Correctional Center was closed earlier this year with nary a word to area legislators of his intent.

On Friday, September 14, Jindal dropped another bombshell.

C. Paul Phelps Correctional Center in DeQuincy is being closed with its 700 medium security prisoners to be transferred to Angola State Penitentiary.

Again, state employees, about 150 of them, have had their livelihoods jerked from under them with no prior warning. About 70 of those will be given the opportunity to transfer to Angola. As for the rest?

Apparently they’re not Jindal’s problem. After all, he likes to say do more with less.

And now, with such a stellar record to back him up, Jindal is turning his attention to the privatization of the LSU Health System and its 10 affiliated hospitals statewide that treat the state’s poor and which train medical students.

Does anyone see a trend?

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