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Former OGB employee critical of BCBS contract with OGB: Legislative committees to consider proposal on Thursday

Posted in Civil Service, Contract, Contracts, Governor's Office, Health Care, Jobs, Layoffs, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, State Agencies, Teague on October 31, 2012| 2 Comments »

Editor’s note: LouisianaVoice would like to acknowledge and thank Kay Prince of Ruston for contributing much of the research that went into this article. She has worked tirelessly with former Sen. Butch Gautreaux on this issue and was gracious enough to share this information with us for our use.

A former employee of the Louisiana Office of Group Benefits OGB) has taken issue with several points in the proposed contract between the Division of Administration (DOA) and Blue Cross/Blue Shield of Louisiana (BCBS) that calls for BCBS to take over the operations of OGB’s Preferred Provider Organization (PPO) plan as the plan’s third party administrator (TPA) in January.

The former employee, who is now retired, examined the contract which is scheduled for consideration by a special joint meeting of the House Appropriations and Senate Finance committees on Thursday, Nov. 1 and found several areas in which he said the state will be getting a bad deal if the contract is approved.

Gov. Piyush Jindal has pushing for the transition for nearly two years now in what he insists will be a cost-cutting measure but which will result in the loss of 177 positions at OGB and 111 actual jobs. The other 66 positions are currently vacant.

One of the things the former employees warns about is an obscure clause on page 8 the contract which says the maximum amount to be paid BCBS shall not exceed $1.1 billion for any one year “unless the director of the Office of Contractual Review approves a contract amendment.” (emphasis ours.)

That is an important provision considering what happened with the privatization of the Office of Risk Management (ORM) in September of 2010. Under terms of that contract, the state was to pay F.A. Richard and Associates (FARA) of Mandeville $68 million to be the TPA for ORM but only a few months into its contract, FARA asked for and received a $6.8 million amendment to its contract, increasing the over contract cost to just under $75 million.

Legislators were upset to learn that the amendment was legal because the law allows a one-time contract amendment of up to 10 percent with only the approval of Contractual Review. The FARA contract amendment was exactly 10 percent and legislators had no say in the matter.

The Jindal administration claims that allowing BCBS to become the TPA for OGB will save the state $20 per year. But if BCBS should seek a similar 10 percent increase in its contract, the $110 million in additional contract costs would wipe out any savings.

Administration projects of OGB’s spending 100 percent of budgeted amounts in several areas whereas the agency historically has spent between 65 and 80 percent of budgeted amounts on administrative costs. “This inflates the projected savings by approximately 20-35 percent,” the retired OGB official said.

Projected savings on building rental may also be overstated, he said, because OGB is locked into a 10year lease for its Baton Rouge office space. The cost of that lease is $100,000 per month and will not be reduced unless OGB can renegotiate its lease.

He said it was misleading to compare Louisiana to other states. First, the only other state that self-administers its health benefits program is Utah which has a smaller population. “You cannot compare staffing patterns for completely different ways of doing business” as the administration did with Florida and Mississippi, for example. “You need to compare total administrative costs for the other states, not just (the) number of employees,” he said.

But of even more importance, he said, is the misconception that it was a sound move to reduce premiums by 7 percent last July.

“The program operated at a small deficit for the fiscal year ending June 30, 2010 (before the premium rate reduction) and is almost guaranteed a significant loss for Fiscal Year 2013 with the 7 percent reduction in premium that was approved by the Division of Administration,” he said.

“The only reason that premiums could be reduced was the fact that the program had a significant surplus. For the current fiscal year the program will be operating on its surplus for significant portion of the current year’s operating expenses…but this cannot go on forever.

“It is another example of using one-time funds to pay for continuing operations of the state. Once the surplus is exhausted, rates will need to be increased significantly to cover continuing operations,” he said.

State health insurance programs have varied over the years and remained pretty much in a state of flux until the administration of OGB CEO Tommy Teague, who was fired on April 15, 2011. It took a major political scandal involving a top state administrator and underworld boss Carlos Marcello to pull the state’s health and life insurance programs out of the doldrums.

OGB itself is relative new as a state agency, having been created on Sept. 1, 1979, as a result of the FBI’s Brilab sting operation which resulted in Commissioner of Administration Charles Roemer’s conviction of conspiracy to violate federal racketeering laws over accusations that he and Marcello took part in a scheme to win a multi-million dollar state group insurance contract through bribery.

Roemer served 15 months of a three-year prison term before his conviction was overturned.

Prior to July 1, 1970, each state agency was responsible for procuring its own insurance contract for its employees. This created a multitude of problems since each contract had different dates, coverage, premiums, etc. Plus, when an employee transferred from one agency to another, it forced the employee to switch coverage which resulted in considerable confusion and in some cases, loss of coverage because of different waiting periods among the various contracts.

The Uniform Insurance Act was passed and went into effect on July 1, 1970 and all Executive Branch agencies were brought under one consolidated health/life insurance contract, which was awarded to Blue Cross for health and Pan American Life for life insurance.

In 1973, when Blue Cross proposed a significant rate increase, the contracts with both Blue Cross and Pan American were terminated and the state’s health and life insurance programs became self-funded by the state. Continental Assurance (CNA) was retained as the TPA to handle claim payment functions, an arrangement that remained in effect for the remainder of the seventies.

It was during this time that the FBI began its sting operation after learning of alleged bribes and the legislature subsequently passed Act 749 of the 1979 regular session which created OGB and placed it under the State Treasurer’s office.

On May 1, 1981, the CNA contract was terminated and all employees who were working for CNA were offered an opportunity to become Civil Service employees, effective May 1. The agency operated under this arrangement until 1998 when the legislature was forced to make a supplemental appropriation of $77 million to cover an unfunded accrued liability (UAL) in the program because the OGB trustees had failed to increase rates to keep up with the program’s claims experience.

The program continued to operate with an UAL until the mid-2000s at which time it began generating a surplus each year through FY 2011, going from a $105 million deficit to its current $500 million surplus in about five years.

Here are the links to the committee memberships:

http://house.louisiana.gov/H_Cmtes/H_Cmte_AP.asp
http://senate.legis.louisiana.gov/Finance/Assignments.asp

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Administration moving forward with presenting OGB layoff plan to Civil Service despite shortage of votes on Thursday

Posted in Attorney General, Governor's Office, Health Care, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, Transparency on October 18, 2012| 7 Comments »

LouisianaVoice has learned that Gov. Piyush Jindal plans to move forward with submitting a layoff plan for the Office of Group Benefits (OGB) to the State Civil Service Commission despite failing to obtain sufficient votes to gain legislative approval of a contract with Blue Cross/Blue Shield (BCBS) for the privatization of the agency.

The Jindal administration has been trying for more than a year and a half to privatize the agency that provides health and life insurance coverage to some 226,000 state employees, retirees and their dependents.

Along with efforts to privatize the agency, Jindal is attempting to lay off 177 OGB employees in a move he claims will save the state $20 million despite an initial cost of $70 million of the current OGB fund balance that will be used to pay BCBS to become the agency’s third party administrator (TPA).

State Rep. Katrina Jackson (D-Monroe), who has been lobbying her fellow House members to oppose the BCBS contract, said Jindal has provided no supporting documentation for the projected savings despite several requests that he do so.

“The Office of Group Benefits does not cost the state any money,” Jackson said on Wednesday. “It is a healthy plan that has always remained viable while offering state employees excellent health care benefits.”

The problem with any effort by the administration to gain approval of its anticipated layoff plan is that justification for any layoff approval is limited to two factors found in chapter 17 of the civil service rules.

http://www.civilservice.la.gov/publicationsnotifications.asp

To approval a layoff plan, the Civil Service Commission must have irrefutable evidence that there is either:

• A lack of funds to continue paying the employees;

• A lack of work sufficient to justify retaining the employees.

The administration, of course, could push the argument that with the contract with BCBS, there would be insufficient work for the 177 employees to perform at OGB.

That argument, however, would revert back to an attorney general’s opinion that legislative concurrence would be required before the contract with BCBS could become effective.

That attorney general’s opinion was initially requested by Jackson who contended that the legislature should be a part of the decision-making process.

And that brings everything back to Thursday’s joint meeting of the House Appropriations Committee and the Senate Finance Committee which was supposed to take up that very issue.

As both sides were still jockeying to line up votes Wednesday afternoon, word came down that the administration had pulled the item from joint committee agenda. The reasons for the deletion varied, depending upon who did the explaining.

Jackson said the delay was simply a matter of the administration’s failure to muster enough votes for approval of the contract.

House Appropriations Chairman Jim Fannin (D-Jonesboro) said the committee members did not receive the 80-page BCBS contract until Tuesday and had not had an opportunity to review it.

The governor’s office, however, said that several key members of the committee were scheduled to be out of town, so the decision was made to postpone the vote.

The reasons given by Fannin and the administration do not mesh but then legislators have been complaining for some time about a lack of communication between lawmakers and the governor’s office.

The civil service rules and the failure of the joint committee to take up the BCBS contract could present a classic Catch-22 scenario if the administration does follow through as planned.

What initially was touted by the administration as an efficiency move designed to save the state millions of dollars seems to have become a secondary issue to one of Jindal’s obsession of having his way, of winning at all costs.

The latest decision to try and push through a layoff plan appears to be an indication that he is determined to prevail in a game in which he is on one side of a metaphoric chess board and legislators on the other. In the middle are the pawns that he appears all too willing to sacrifice in order to gain an advantage.

Those pawns are state employees.

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Notable Quotables (in their own words)

Posted in Civil Service, Governor's Office, Health Care, House, Senate, Legislature, Legislators, Notable Quotables, OGB, Office of Group Benefits, Privatization on October 17, 2012| 1 Comment »

“We just got the contract yesterday and we need to give people an opportunity to look at it,” said Fannin, who added that the contract was nearly 80 pages.”

—House Appropriations Committee Chairman Jim Fannin, explaining the reason for cancelling Thursday’s joint meeting of the Appropriations Committee and the Senate Finance Committee to consider approving the contract for Blue Cross/Blue Shield of Louisiana (BCBS) to take over operations of the Office of Group Benefits. The governor’s office, however, said the reason for the cancellation was that key committee members were scheduled to be out of town.

That would be an oops moment…

…and another good argument for better communications between legislators and Piyush.

“Although we can be somewhat sure that the administration will continue in its attempt to gain committee votes for approval of this effort, it is our hope that the legislature will continue to stand strong and operate as a separate, co-equal branch of government.”

—State Rep. Katrina Jackson (D-Monroe), in a more plausible prepared statement following cancellation of Thursday’s joint meeting of the House Appropriations and Senate Finance committees to consider approval of the BCBS contract to take over as third party administrator (TPA) of the Office of Group Benefits (OGB). In reality, the meeting was most likely cancelled after Gov. Piyush Jindal’s office realized it did not have the votes for approval of the contract. Jackson is a member of the House Appropriations Committee.

“Legislators’ votes just went up in price.”

—C.B. Forgotson.

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π-yush minions can count; House Appropriations, Senate Finance joint committee meeting on privatization of OGB is cancelled after governor’s office sees it didn’t have the votes

Posted in Civil Service, Governor's Office, Health Care, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Politicians, Privatization, Transparency on October 17, 2012| 4 Comments »

Thursday’s scheduled joint meeting of the House Appropriations Committee and the Senate Finance Committee to consider the approval for Blue Cross/Blue Shield of Louisiana to take over the Office of Group Benefits (OGB) Preferred Provider Organization health coverage has been scrubbed.

The reasons for cancelling Thursday’s meeting vary, depending upon who is doing the explaining.

Appropriations Committee Chairman Rep. Jim Fannin (D-Jonesboro) said that he and Senate Finance Committee Chairman Jack Donahue (R-Mandeville) agreed late Wednesday morning to remove the OGB item from the agendas of the joint meeting.

“We just got the contract (with BCBS) yesterday and we need to give people an opportunity to look at it,” said Fannin, who added that the contract was nearly 80 pages.

Fannin, who supports the privatization, admitted the vote count was close but insisted that wasn’t the reason for postponing action.

State Rep. Katrina Jackson, a member of the Appropriations Committee who opposes the contract, however, interpreted the cancellation differently.

“I believe that the cancellation of this meeting indicates the legislature’s willingness to exert independence as a separate and equal branch of government,” she said, adding that she was certain that the administration would continue to apply pressure on members of both committees to come up with the needed votes.

Fanning should have gotten with the governor’s office and gotten their stories together. The two versions don’t mesh.

The word out of the governor’s office was that it has the votes already but that certain key members were scheduled to be out of town Thursday so the meeting needed to be re-scheduled.

That claim can probably be taken with a grain of salt. This is the same administration that insisted it took no active part in the day to day operations of LSU but yet insisted on reviewing any public records relative to the LSU Health Services prior to their release to Capitol News Service.

A more likely scenario is that Gov. Piyush Jindal’s staff members can count.

They saw that the votes (a simple majority is needed to approve the privatization) were not there and like NASA, aborted the mission.

For now.

Members of both committees were being lobbied heavily by both sides late Wednesday in the final hours before the meeting was finally cancelled. It’s a certainty that the pressure on the committee members will not abate—especially from the governor’s office. This is a must-win for him.

The original number of OGB personnel expected to lose their jobs with the BCBS takeover was 177 but some have already retired or found other jobs. That number is now about 150.

An important twist to the story involves the proposed layoffs. The Division of Administration is scheduled to submit a layoff plan to the Civil Service Commission in next few days but no layoff plan may be considered by the commission without an approved contract with Blue Cross/Blue Shield (BCBS).

Without the concurrence of the two committees, however, there can be no approved contract and thus, no layoff plan.

The privatization plan (but not the layoff plan) was approved by the Civil Service Commission in August but State Rep. Katrina Jackson (D-Monroe) requested and got an attorney general’s opinion that said the administration must obtain the concurrence of the legislature to finalize the transfer.
BCBS already serves as the third party administrator (TPA) for OGB’s HMO program.

OGB has accrued a fund balance in excess of $500 million over the past six years since Tommy Teague took over as director of OGB. But he was fired on April 15, 2011 when he did not get on board the Jindal privatization plan quickly enough. His successor lasted only six weeks before he, too, was gone.

Jindal has claimed that a private TPA would be able to run the various health and life insurance plans of about 225,000 state employees, retirees and their dependents.

A Legislative Auditor’s report, however, said that privatization could lead to increased health insurance premiums because of a private insurer’s higher administrative and marketing costs, its requirement to pay taxes on income and its need to realize an operating profit. The state does not pay taxes nor is it required to turn a profit.

The Jindal administration has employed tactics bordering on the clandestine in efforts to shore up its position. At one point it even refused to release a report by New Orleans-based Chaffe & Associates with which it contracted to determine the “fair market value” of OGB’s business.

When a copy of the report was released, however, questions arose immediately because of conflicting dates given by the Division of Administration (DOA) as to its receipt date and by the fact that none of the pages of the report was date-stamped.

DOA routinely date stamps every page of documents it receives to indicate the date and time the documents were received.

This led to speculation that there may have been two Chaffe reports. Even so, the one that was leaked to the Baton Rouge Advocate said that a private insurer would be required to build in the extra costs of taxes and profits when setting premiums.

Much of the reason for the closer-than-expected vote may have to do with growing resentment on the part of legislators who have seen hospitals and/or prisons closed in their districts, actions they say were taken by the administration without the benefit of giving lawmakers a heads-up.

Jindal, in closing prisons and hospitals, has done so while leaving it up to area legislators to try and explain to constituents why they will be out of work or why health care will be either cut back or unavailable.

Only this week, notices went out to 41 employees at E.A. Conway Hospital in Monroe that they would no longer be employed after Nov. 30—just in time for the Christmas holidays. Twenty-five of those were nurses.

Similar cutbacks have taken place at health care facilities all over the state and in August, Jindal abruptly announced the closure of Southeast Louisiana Hospital in Mandeville, effective this month, throwing some 300 employees out of work.

Moreover, with the earlier closure of a mental health facility in New Orleans, the entire area of Orleans, Jefferson, Plaquemines, St. Bernard, Tangipahoa, Washington and St. Tammany will be without access to mental health treatment at a state facility.

“The Office of Group Benefits does not cost the state any money,” Jackson said. “It is a healthy plan that has always remained viable while offering …excellent health care benefits.

“Our research has revealed that more than $70 million of the existing OGB surplus (more than $500 million) would be used to effectuate this privatization,” she said.

“The governor’s office claims that the state will realize $20 million in savings. However, this claim came without any supporting documentation even after numerous requests for that documentation.

“OGB’s administrative costs are 2 percent while the industry standard for private insurers is 6 percent. It seems that, at some point, it (the privatization) would actually cost the state additional money,” Jackson said.

http://house.louisiana.gov/H_Cmtes/H_Cmte_AP.asp

http://senate.legis.louisiana.gov/Finance/Assignments.asp

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Notable Quotables (in their own words)

Posted in Civil Service, Governor's Office, Health Care, House, Senate, Legislature, Legislators, Notable Quotables, OGB, Office of Group Benefits, Privatization on October 17, 2012| 2 Comments »

“I believe I’d have a coronary if they went against the governor on this.”

—A longtime political observor, commenting on the upcoming joint meeting of the House Appropriations and Senate Finance committees to consider Gov. Piyush Jindal’s proposed privatization of the Office of Group Benefits (OGB).

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