Jindal’s health insurance privatization plan raids fund to plug budget

6th May 2011   ·   0 Comments

By Christopher Tidmore
The Louisiana Weekly Contributing Writer

Most people do not realize that the State of Louisiana is in the insurance business.

The Pelican State is only one of two in the Union that self-health insures its employees, 148,000 (and 107,000 of their dependents) rather than seeking insurance in the private markets.

Bobby Jindal wants to change that. His critics, though, claim that the Administration’s real motive is to rob a half-billion dollar surplus to plug a hole in the Medicaid budget with this one-time money.

The Governor has proposed to hire a private company to run a state worker and retiree health insurance program. Commissioner of Ad­mini­­stration Paul Rainwater argued to the Senate and House Retirement Committees that Louisiana should not be in the day-to-day business of running an insurance company.

He explained that a private company would be required to offer the same type of health care plan to workers and retirees and that an outside firm would be more efficient and offer better claims management.

“If we don’t get to terms that make sense, we won’t sign a contract,” Rainwater told the legislators.

In a news conference Tuesday, Governor Jindal argued that there would be real savings. The Office of Group Benefits employs roughly 300 state workers. He said in other states with similar functions there are 25 to 75 employees.

“We need roughly half the employees,” maintained Jindal, who estimated that Louisiana can save $10 million annually on program operating costs with privatization. He said state employees would be better served “at a lower cost.”

He said opponents of the plan are defenders of the status quo. Only Utah has a state-run plan. Critics, like Sen. Ben Nevers of Bogalusa, echo worries of state employees that coverage might decrease while costs to civil servants could increase after the first five-year contract expires.

However, they also note that the insurance fund has a $500 million surplus. The Jindal Administration has proposed to take this one time bonus and use it to plug a $472 million hole in the Medicaid budget, to offset cuts.

One of Jindal’s original campaign platforms pledged not to use “one-time” money to plug on-going funding holes. Jindal called that “kicking the problem” down the road for future legislators. Yet, his proposal for the healthcare surplus would do just that.

Many state employees do not wish to see any changes. Others can see the point of using outside re-insurance, saving the state from major claims exposure should a disaster or pandemic strike.

Regardless, they argue that the surplus should be retained to keep costs down, and to insure that ever-increasing amounts are not deducted from state employee paychecks — as private sector workers have experienced.

Legislative critics on the right — and some on the left — simply wish that the surplus not be used for one-time expenses. Some have pointed out that the money could be put into the State Retirement fund to plug an almost $20 billion dollar hole. (In the late 1980s, the legislature pledged to contribute as much as $400 million a year to plug the hole. Almost no money was ever appropriated, leaving the state exposed to billions in liabilities.)

Others have suggested another medical option.

The proposed Uni­v­­­ersity Medical Center in the Mid-City area of New Orleans, the successor to Big Charity, remains underfunded by over $250 million by the state, and could cost a $100 million in ongoing subsidies.

Some legislators maintain that the money should be put into a reserve fund for the new LSU hospital.

That is especially true in the wake of a report released last week by Kaufman, Hall & Associates that shows the planned facility “is materially larger than is supportable.”

The Kaufman Hall study “projects a need for annual state general-fund subsidies ranging from $72.5 million in 2015, the projected opening year, to as high as $108.4 million in 2019 and $100.7 million in 2020.”

Senator David Vitter has called upon the Jindal and Obama Admin­istration to downside the project, and the U.S. Depart­ment of Housing and Urban Development has seemed reluctant to release the promised $1.2 billion for the hospital.

Some LSU supporters have told The Louisiana Weekly that the $510 million could go a long way to assuage federal fears that the 424-bed Mega-Charity Hospital is unsustainable.

This story originally published in the April 25, 2011 print edition of The Louisiana Weekly newspaper.