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Archive for the ‘OGB, Office of Group Benefits’ Category

Morgan Keegan report on OGB’s fate is at DOA but don’t expect its release; it’s ‘part of the deliberative process’

Posted in Governor's Office, Layoffs, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, Transparency on February 8, 2012| 1 Comment »

The long-awaited report by Morgan Keegan on the proposed fate of the Louisiana Office of Group Benefits (OGB) has been turned over to the Division of Administration, LouisianaVoice has learned.

LouisianaVoice has made a formal request under the Louisiana Public Records Laws for a copy of the Morgan Keegan report. That request was directed on Wednesday to Commissioner of Administration Paul Rainwater.

But don’t expect the report to be released willingly. Rainwater, in all probablity will fall back on the erroneous claim that, like the notorious Chaffe & Associates report of last year, it is exempt from the public records law “as part of the deliberative process.” Even that claim was made only after Rainwater’s first attempting to deny the existence of the Chaffe report. To say this administration is willing to bend the rules in order to protect its backside is being charitable.

The Morgan Keegan report is said to have included several options, two of which included the outright sale of OGB or turning the administration of the preferred provider organization (PPO) over to a third party administrator (TPA)—a move that would be accompanied by a massive layoff of OGB employees who presently process claims by state employees, retirees and dependents.

An earlier report, and the number cited by Rainwater last spring in testimony before the Louisiana Legislature, said that 149 OGB employees would be laid off.

That number now sits at 177.

The word of the layoffs comes only days after word of Jindal’s hiring of several former legislators and relatives of former chief of staff Timmy Teepell to high-level positions in his administration.

It was earlier reported by LouisianaVoice that the executive budget to be delivered to the Joint Legislative Committee on the Budget on Thursday would include a line item to sell OGB outright for $189 million but the Jindal administration later backed off on that option and chose the third party administrator instead.

Jindal was reported to have been only lukewarm to either proposal because, in his words, the state would still be “in the insurance business.”

Sources close to the administration said that Jindal has added yet another option: to do nothing in case of another widespread protest as was experienced when the administration first floated the idea of privatization the agency that has accrued a $500 million surplus while administering health care claims for state employees, retirees and dependents.

Rainwater fired former OGB director Tommy Teague last April after Teague did not fall in line quickly enough over the proposal to sell the agency. Afterwards, a firestorm of protests erupted across the state from state employees and retirees that resulted in Rainwater’s vacillating between selling OGB or contracting with a TPA.

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OGB privatization in Jindal’s budget will mean massive layoffs but it’s really important that he pleases ALEC

Posted in Budget, Governor's Office, Layoffs, OGB, Office of Group Benefits, Teague, Transparency on February 7, 2012| 4 Comments »

The Jindal administration has made last-minute changes in the executive budget to be submitted to the Joint Legislative Committee on the Budget on Thursday that could, if passed, result in “massive layoffs” in the Office of Group Benefits (OGB), LouisianaVoice has learned.

Under the revised budget, OGB will not be sold outright as originally advanced in an earlier version of the budget but instead OGB’s Preferred Provider Organization (PPO) will be taken over by a third party administrator (TPA) to be run in the same manner as the state’s HMO plan that is currently administered by Blue Cross/Blue Shield of Louisiana.

The original executive budget included a provision for the outright sale of OGB. Had that remained on the table and a buyer found, Morgan Keegan financial advisors of Memphis, Tennessee, stood to reap a $750,000 bonus for finding a buyer for OGB.

It was not immediately clear if the bonus for the legally-troubled firm—Morgan Keegan was fined $210 million by the Securities and Exchange Commission nearly two years ago for misrepresenting critical information to investors—would still be an option.

What is clear, however, is that there would be massive layoffs of OGB employees who currently run the state’s self-insured PPO which presently has a surplus of some $500 million.

Commissioner of Administration Paul Rainwater testified to the legislature last year that it was necessary to reduce the work force at OGB by 149 persons. Ostensibly, those would be the employees who now handle claims for state employees, retirees and their dependents.

The good news is there will be no premium increase to state employees and retirees in Fy-2013.

While the plan to sell OGB has been altered, the contracting of a TPA will nevertheless be tantamount to privatization of an agency that is generally well-received by state employees. The agency has established a record of rapid turnarounds on claims and under former administrator Tommy Teague, amassed the $500 million surplus.

Teague was fired by when he didn’t fall into line quickly enough to suit Rainwater over last spring’s efforts to privatize the agency. In his testimony, Rainwater flip-flopped several times as to whether the governor’s intent was to sell OGB or contract with a TPA. He used both terms almost interchangeably during questioning by legislators.

OGB is only one of several state operations Jindal is attempting to privatize. He succeeded with the Office of Risk Management (ORM), but only partially. The state paid F.A. Richard & Associates (FARA) $68 million in 2010 to take over ORM only to have FARA return eight months later for a contract amendment of $6.8 million, bring the total price to nearly $75 million. A scant two weeks later, FARA was sold to an Ohio company and last fall, that company was in turn sold to a firm out of New York. Neither transfer of ORM to the second or third firm was given advance written approval as was required of the state’s contract with FARA.

Jindal’s efforts to sell two state prisons were thwarted last year but it is expected that those efforts will be renewed.

The governor also is moving ahead full-throttle with his efforts to create for-profit charter schools to replace so-called failing public schools. There are some non-profit charter schools scattered throughout the state but the emphasis has been on for-profit schools as well as vouchers to enable children to move from failing schools to charter schools.

Jindal recently fired a shot across the bow of public school teachers when he unveiled his ambitious education program not before teachers but at the annual meeting of the Louisiana Association of Business and Industry, a virtual slap in the teachers’ faces by the proponent of virtual schools.

Jindal elevated—or lowered, if you prefer—the debate be suggesting that the executive director of the Louisiana Association of Educators should resign for his remark that poor, uneducated families might not have the wherewithal or the expertise needed to navigate the bureaucracy to transfer their children to better schools under Jindal’s proposed voucher system.

The governor, not content with simply promoting his program, suggested that teachers are given pay raises for the simple act of breathing and that they could only be fired for selling drugs in the workplace (schools).

Parts of the state’s Medicaid program have also been privatized by Jindal but his efforts to contract out the Department of Health and Hospital’s information technology services met stiff resistance from the state Civil Service Commission last week.

That confrontation, won for the moment by the Civil Service Commission, could serve as the impetus for Jindal to renew his unsuccessful 2010 efforts to abolish civil service and the Civil Service Commission.

State Rep. John Schroder (R-Abita Springs) introduced a handful of bills that year dealing with merit pay raises for state classified workers, and civil service in general, none of which were passed.

All of Jindal’s privatization proposals appear to be ripped directly from the pages of the playbook of the American Legislative Exchange Council (ALEC).

That playbook, an actual internet web page, includes a section entitled “Tools to Control Costs and Improve Government Efficiency. Among the “tools” it recommended were:

• Adopt a state hiring freeze;

• Reform state pensions;

• Delay automatic pay increases (we wondered where legislators came up with the term “automatic” in freezing merit increases a couple of years back;

• Embrace the expanded use of privatization and competitive contracting;

• Restructure state retiree health care plans.

Jindal only recently unveiled his plan for restructuring the state retirement system, a plan that includes tighter retirement qualifications, increased employee contributions, a revised formula for calculating benefits, defined contributions as opposed to the present defined benefits plan (similar to 401K plans found in the private sector, and a proposed lump-sum payout upon retirement.

The one issue that has remained unaddressed in the retirement discussion is if the state does go to a defined contribution plan such as those found in 401K plans, will the state then be required to pay the usual employer share to Social Security?

Some state employees currently do not pay into Social Security and thus are not qualified for Social Security benefits or Medicare upon retirement unless they worked in the private sector prior to their state employment.

If Jindal should revamp state retirement, it could mean that the state could be required to pay the customary employer percentage into those programs which could mean any savings achieved by privatization could be negated.

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OGB sale proposal included in Executive Budget to be presented to joint legislative committee next Thursday

Posted in ALEC, American Legislative Exchange Council, Budget, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Politicians, Transparency on February 3, 2012| 8 Comments »

Don’t say we didn’t warn you.

As recently as Jan. 31—less than a week ago—we told you that Gov. Bobby Jindal is following the playbook of the American Legislative Exchange Council (ALEC) almost to the letter.

That playbook includes a section entitled “Tools to Control Costs and Improve Government Efficiency.” Among the “tools” it recommended were:

• Adopt a state hiring freeze;

• Reform state pensions;

• Delay automatic pay increases (we wondered where legislators came up with the term “automatic” in freezing merit increases a couple of years back);

• Embrace the expanded use of privatization and competitive contracting.

Each of these has already been done or is in the process of being done.

Next Thursday, the administration will present the governor’s Executive Budget for Fiscal Year 2012-2013. Included in the budget will be the proposed sale of the Office of Group Benefits (OGB) for $189 million, to become effective Jan. 1, 2013.

The committee meeting is scheduled to be held at 9:30 a.m. in House Committee Room 5.

The $189 million apparently is the price tag derived by Morgan Keegan, the Memphis banking firm that stands to reap a $750,000 bonus over and above the $150,000 for assessing OGB’s value if it is successful in negotiating the OGB sale at the $189 million price.

Morgan Keegan was itself only recently sold after being fined $210 million nearly two years ago by the Securities and Exchange Commission for misrepresenting critical information to investors.

Whoever ultimately purchases OGB will take with them the $500 million surplus now carried on the OGB books which the new operators will use to pay claims.

LouisianaVoice has also learned that once the sale of OGB is successfully negotiated and the agency is taken over by private industry, premiums will rise by approximately 10 percent.

There are other proposed changes coming that we can tell you about next week.

We can tell you this much, though: It ain’t gonna be pretty.

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Jindal economic strategy: consultant shows up for $150,000, privatizes a viable state agency and collects $750,000 bonus

Posted in Budget, Ethics, Governor's Office, Health Care, OGB, Office of Group Benefits, Privatization, Transparency on February 2, 2012| 1 Comment »

Here’s a can’t-miss formula for success that Gov. Bobby Jindal is asking us to accept with no questions asked:

First, hire a consultant who was hit with a major fine for misleading clients—we’ll call him Shady—to find employment for a second consultant—we’ll call him Sneaky—who was also fined for misrepresentation.

Then a third party enters the picture to contract with Sneaky to broker the sale of a major asset even as Shady continues to negotiate for full time employment for Sneaky.

Set the contract at $150,000 just for Sneaky to show up to make a determination of the asset’s financial worth.

Then, if the asset sells, well, let’s give Sneaky a nice fat bonus of say, $750,000 for providing “unbiased advice” on the bidding process and contract negotiations.

We will repeat that last part: Sneaky is expected to give “unbiased advice” in its efforts to collect an additional $750,000.

Remember, too, that Sneaky has already been fined $210 million for misrepresenting critical information “exactly when investors needed it most.”

That is precisely the scenario that currently exists with the contract between Morgan Keegan brokerage and the Louisiana Division of Administration regarding the proposed sale of the Office of Group Benefits (OGB) and its $500 million surplus.

After the state’s attempt to engage Goldman Sachs at a cost of $6 million to market OGB to private investors—you may remember that Goldman Sachs helped write the request for proposals (RFP) for the OGB sale and then submitted the only proposal—fell through over demands by Goldman Sachs that it be indemnified from any potential litigation.

A new RFP was then issued and Morgan Keegan was the low bidder last July.

But Morgan Keegan had recently agreed to pay $210 million to settle allegations that it had fraudulently marketed mutual funds filled with subprime mortgages and artificially inflated the funds’ prices.

So Regions Financial Corp., Morgan Keegan’s parent company, decided to divest itself of the troublesome brokerage firm.

So, who did Regions retain to explore “strategic alternatives” for Morgan Keegan?

None other than Goldman Sachs which, less than an year earlier, was fined $587 million over claims that it had misled investors in collateralized debt obligations linked to subprime mortgages.

Morgan Keegan eventually sold, but at a price that was less than the value it had recorded on its financial books.

Now comes word that if Morgan Keegan, which is being paid $150,000 to determine the financial value of OGB, will rake in a bonus of up to $750,000 more if OGB is subsequently privatized.

Commissioner of Administration Paul Rainwater promised that Morgan Keegan, which contributed $1,000 to Jindal’s 2007 election campaign, will provide “unbiased advice” in its efforts to help market OGB.

In what is becoming an all-too-familiar refrain, OGB board Chairman James H. Lee attempted to obtain a copy of the Morgan Keegan contract from the administration in November but was told it was not finalized.

The contract, however, was signed by Morgan Keegan’s managing director on Oct. 31 and an OGB representative on Nov. 2.

Something’s a little rotten here. It’s a lot like efforts to obtain the infamous Chaffe & Associates report last year. Jindal hired Chaffe to make a quickie determination of OGB’s book value but then Rainwater refused to make copies of the report available to legislators and the media.

When a copy of the report was finally “leaked,” it had dates that were inconsistent with receipt dates provided LouisianaVoice by Rainwater and the contract was not date-stamped as are all documents received by the Division of Administration (DOA).

Lee said he has been trying since August to obtain a quorum of the OGB board of directors but at least one of the governor’s three appointed members is absent for each meeting. Normally, there are five members appointed by the governor, but two of the appointive positions are currently vacant.

“It is my opinion that they (the Jindal administration) have the full intention of selling off OGB as quietly as possible before anyone realizes what is going on,” Lee said. “Should this happen, the active and retired employees of the state will see reduced benefits and the taxpayers will see increased costs,” he added.

Former State Sen. Butch Gautreaux (D-Morgan City), a former member of the OGB board, said he is unclear as to why Jindal insists on privatizing a state agency that saves the state money. He opined that the governor may want to dismantle OGB and its $500 million surplus in order to more easily criticize President Barack Obama’s national health-care program.

“He needs to destroy it (OGB) for his personal ambitions,” Gautreaux said.

That should come as no surprise to anyone who has watched this governor.

His first agency to privatize was the Office of Risk Management (ORM). The state paid F.A. Richard & Associates (FARA) of Mandeville $68 million to take over ORM. In less than a year, the FARA contract was amended by $6.8 million. Two weeks later, the contract was transferred—without the prior written consent of the state, as required by the contract—to a second firm and months later it was transferred to a third firm, again without the legally required written consent.

ORM was the first of a succession of agencies that Jindal has either tried to privatized or announced intentions to do so. They include state prisons, the state’s Medicaid program, OGB, and education.

The one thing that Jindal has never once explained to the voters of Louisiana is this:

If things are so badly run in this state, if things are so screwed up, if state employees are so stupid and lazy and teachers so pitifully inept and impossible to fire “short of selling drugs in the workplace,” (Jindal’s words, by the way) how did we ever make it this far?

How is it that one day we woke up as a state and realized that only one man had been anointed with the answers to all our ills, just one man who could solve the problems of state retirement, prison costs, Medicaid administration, public education, higher education, employee health benefits, and state agency risk exposure?

How is it that one man is so incredibly blessed with such vision, such gifts of perception, insight, understanding and infinite wisdom? How indeed?

We will probably never know the source of all his wonderful attributes. After all, as the Shreveport Times recently observed, Jindal has spent four years “limiting or avoiding extended interviews about his programs with journalists outside Baton Rouge, not to mention fighting efforts to open his administration’s records to public view.”

Considering the fact that the Times has consistently carried the water for the Republican ideology, those critical words are especially surprising—and harsh. The paper further observed that Jindal made dozens of trips to northwest Louisiana but most of those were controlled settings, so access was limited. “Fortunate is the hometown journalist who can ask a follow-up question before a governor’s aide whisks away his boss,” the paper said.

Earlier this week, the Baton Rouge Advocate noted that the Zachary and West Feliciana Parish school systems, two of the better performing systems in the state, are facing financial disaster because of Jindal’s refusal to increase funding through the Minimum Foundation Program for public education. It’s no secret that public education is subordinate to his obsession with funding charter schools, vouchers and virtual schools.

Only weeks after it was announced last March that ORM would be privatized, an ORM employee was in a restaurant in downtown Baton Rouge around 4:30 p.m. when Jindal aides strode in and informed her that she would have to leave because Jindal had a fund raiser scheduled at the restaurant at 5 p.m.

“I paid for my food and my drink and I’m going to stay right here until I finish,” the defiant employee said.

She did, and on her way out, she met Jindal as he was entering the establishment. Jindal approached her with his hand extended and asked, “How are you today?”

“Not well at all,” was her curt reply. “You just privatized my agency and put some good people out of work.”

Jindal blinked and mumbled, “I’m sorry” before moving past her.

Sorry, Guv, we aren’t buying it. To be truly sorry, one must first be compassionate and one must be sincere. It also helps to have a little class.

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To limit exposure to official actions, make announcement late Friday or late Thursday before big weekend holiday

Posted in Governor's Office, OGB, Office of Group Benefits, ORM, Office of Risk Management, Teague, Transparency, Uncategorized on January 2, 2012| Leave a Comment »

It is a long-held tradition at all levels of government that anytime an agency does not want attention drawn to any official action, make the announcement late on a Friday afternoon when most of the “working” media have left for the weekend.

If that Friday just happens to be on the eve of a major holiday like Christmas or New Year’s, so much the better.

That’s what happened with the Division of Administration (DOA) and two news releases about major personnel changes recently. We waited until now to assist DOA in disseminating the stories.

DOA actually issued its official announcements not on Fridays but toward the close of business on Thursday, Dec. 22, and Thursday, Dec. 29 because, well, both Fridays were official state holidays for Christmas and New Year’s, respectively. It had the same effect, of course, as a Friday release on a normal work week: near zero media attention and less than zero media follow-up.

On Thursday, Dec. 22, the official news release went out announcing the appointment of Charles Calvi, Jr., to serve as Chief Executive Officer of the Louisiana Office of Group Benefits (OGB).

The following Thursday, on Dec. 29, it was announced that Mark Brady was leaving as DOA Deputy Commissioner of Administration.

Both announcements were made by Commissioner of Administration Paul Rainwater.

Actually, the second news release was not so much to announce Brady’s departure as to proclaim the appointment of Assistant Commissioner Ray Stockstill as his successor. In fact, Rainwater devoted precisely two sentences to Brady:

“Rainwater also thanked and praised outgoing Deputy Commissioner Mark Brady, who will assist the Division in transition through January before returning to the private sector,” the news release said. The release quoted Rainwater as saying, “‘Mark’s contribution has been invaluable, and I am grateful for the integrity, intelligence, and passion that he brought to the job and that I’m sure will serve him well in his next endeavors.’”

That’s it. Nothing about his tenure at DOA, nothing about his previous background, nothing about his reasons for leaving or his future plans except that he was “returning to the private sector.”

There were no mentions of the previous two OGB CEOs, both of whom left or were fired in 2011. Nor was there any explanation of how the two moves may be inter-connected or how Brady was at the forefront of last spring’s efforts to sell off OGB to private investors.

Tommy Teague was fired by Brady last April 15 when Brady and Rainwater concluded that Teague was not sufficiently enthusiastic about the administration’s proposed selloff of group benefits and its $500 million surplus.

He was replaced by Scott Kipper, who resigned effective June 24, after a controversial report by Chaffe & Associates of New Orleans did not square up with the administration’s insistence that the OGB sale and accompanying elimination of 149 jobs would be good for the state, 62,000 state employees and even more retirees and dependents.

When the Chaffe report did not say what Gov. Jindal desired, the administration subsequently retained Morgan Keegan to conduct a financial analysis of OGB preparatory to a second effort to sell off the agency despite vocal opposition from retired state employees, retired teachers and a state district judges’ association.

The Morgan Keegan report is expected to be finalized and submitted to the state in February but if events play out the way they did with the Chaffe report, don’t expect Rainwater to be forthcoming with contents of the report. Rainwater, despite harsh criticism from legislators, steadfastly refused to release the Chaffe report to lawmakers.

Rainwater did not hesitate to throw Brady under the bus during Brady’s testimony before the Senate and Governmental Affairs Committee. Committee members, lead by Sen. Ed Murray, subjected Brady to withering criticism over the administration’s refusal to release the report as Rainwater busied himself texting even as Brady twisted in the wind.

Following the Chaffe debacle and Jindal’s embarrassing setback in his efforts to sell three state prisons, the administration pulled back on its privatizing efforts. In the interim, the Office of Risk Management (ORM) has been transferred to a third private firm in apparent violation of the state’s contract with F.A. Richard & Associates (FARA).

The state paid FARA $68 million to take ORM off its hands and then amended that contract by another $6.8 million less than two weeks before FARA was sold to Avizent Risk Management Solutions of Ohio which was in turn recently purchased by York Claims Service of New York.

The state’s original contract with FARA specifically prohibits any transfer of contractual services without prior written consent. When a public records request was made for written consent to transfer the contract, DOA responded that no such documents exist.

Rainwater announced nothing further will be done toward the sale of OGB until early 2013. And while OGB proposed a rate increase of about three percent for the coming year, the administration insisted on at least a five percent bump. The bigger increase will obviously make the agency far more attractive to potential buyers.

Calvi has more than 40 years of experience in the healthcare, insurance and employee benefits fields. For seven years he worked for Gulf South Health Plan. He also worked eight years as CEO of BestCare, Inc., where he developed and owned the first Physician Hospital Network in the state.

Stockstill is a retire-rehire employee who had previously worked in DOA as state director for planning and budget until being named assistant commissioner in February of 2010. He retired from that $180,000 per year position, effective Christmas Day of 2010 and returned as a re-hire two days later.

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