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.