Remember back when Bobby Jindal was a young up-and-comer in the Mike Foster administration? Former Governor Duck Hunter* appointed Jindal to be Secretary of Health and Hospitals at the precocious age of 24. The young whiz kid didn't make too many waves during his tenure there. But he did a pretty good job of figuring out where all the money was. This would be useful later when, as Governor, he helped people steal much of it.
We've already talked about this a few times this week. First there's
the slow-motion obviousness of the Bruce Greenstein directed grift of Medicaid privatization. Later in the week we saw that Jindal's hospital privatization scheme was causing rape victims in New Orleans
to be billed for their examinations.
Finally, there's yet another health care related Jindal grift in the news. The State Office of Group Benefits, which manages health care and retirement benefits for state employees,
is going bankrupt.
Group Benefits will soon go broke if changes to its health insurance
offerings aren’t made, Commissioner of Administration Kristy Nichols
warned legislators Thursday.
“If we do not make the changes now the Office of Group Benefits will
not have the money to pay for the health care of its members,” Nichols
said.
But some legislators and insurance plan members said other options
are available that won’t be as financially devastating to the 230,000
state employees, teachers, retirees and their dependents who are members
of Group Benefits, especially retirees on fixed incomes, and time
should be given to pursue those options.
“It’s an economic catastrophe for thousands of citizens of Louisiana
who do not deserve this,” said Peggy Schwarz, of Braithwaite.
Some blamed the Jindal administration for creating the crisis because of poor management and “reckless decisions.”
"Some blamed the Jindal administration."
Well, yeah. "Some" have been blaming Jindal for this since the outset. It's a lot like the Greenstein situation in that regard. It's another one of these Jindal privatization schemes that divide the spoils amongst cronies at the expense of both taxpayers and people who depend on the services provided.
Let's see how far back we can go to explain this one. Sometime in the spring of 2011, Tom Aswell started writing about this.
Here is a post he wrote about the request for proposals for privatizing OGB.
It was picked up by TPM.
But critics of the governor's plan contend that any financial benefit
will be a one-time thing. In the long run, they charge, privatizing
will result in higher costs for employees, the state and, therefore, the
taxpayer. Some have even suggested that the plan is a way for the state
to get its hands on part of the agency's sizeable surplus, which
Louisiana law prohibits
from being used for "cash flow purposes" or any other purpose
"inconsistent" with the administration of the department that generated
it.
A few days after Jindal unveiled his budget, blogger and local
reporter Tom Aswell, who was at the time still an employee of the
state's Office of Risk Management (which was itself privatized last
year), reported
that investment bank Goldman Sachs had helped write the OGB's Request
for Proposals. He says the only bid that came back for the advisory role
-- and the $6 million fee -- was from Goldman. Among the questions TPM
has posed to DoA, with no response so far, is what, if any, involvement
Goldman Sachs had in the request for proposal. TPM has also reached out
to Goldman for comment. Aswell also wrote that an employee at the DoA,
who did not want to be identified, had informed him that, as part a
sale of the OGB, the state would receive $150 million to $200 million of
the surplus, with the rest going to the purchaser.
So you've got a stable department that provides a vital service for state employees and runs a budget surplus. Sounds great... but what if we break it open and suck out all the money! This is a running theme of Bobby Jindal's tenure in office.
Also a running theme,
Bobby Jindal knows and cares a lot about health care so it's ok.
Jindal, meanwhile, noted that he is also a state worker whose coverage is provided through the benefits office.
Noting
that one of his two sons was born with a heart condition, Jindal said,
"I'm not going to do anything that jeopardizes health-care coverage for
my family or other state employees."
"Some" raise objections. But then
"some" get fired for that.
"Should the state of Louisiana be an insurance company or do you
provide it to a private company to run?" Commissioner Of Administration
Paul Rainwater told the committee. Rainwater said privatizing would
"unleash some of the value" of the agency, potentially net the state
$150 million in up front cash, and "create something that's much more
efficient."
(Former CEO Tommy) Teague was fired from OGB on April 15, just as questions about the
potential sale of the agency were getting louder. And when he testified
Tuesday, he appeared much less convinced than Rainwater about the
financial benefits of the proposed plan. By many accounts a popular and
competent administrator, Teague referred to OGB as "we" several times
during his testimony.
"Fully-insured [insurance] plans are simply more expensive than self-insured plans," he said.
Teague also said the agency's large surplus fund -- which was
accumulated during his tenure -- would be part of any sale, but
expressed bewilderment at the math of such a deal.
"You give up 520 [million dollars], and you're going to get back 150
[million dollars]?" Teague said. "I don't understand how that works."
How it works is you "unleash some of the value" so that the state and the
contracting management company and the consultants can take it all, of course. Teague didn't get that. So they fired him and
brought in someone who.. sort of did.
Early in the hearing, State Sen. Edwin R. Murray (D) wanted to know if
Kipper had seen the report, but had a hard time getting Kipper to even
acknowledge that a report exists.
"Senator Murray, I have not seen that report," Kipper said at one point. "I have not seen that report."
"So it does exist?" Murray asked.
"I have no knowledge that it exists--" Kipper responded.
A
little later on, when the existence of the report had been firmed up,
Murray wanted to know, more specifically, if Kipper himself had asked to
see the report. Kipper said that he had not, because he does not want
his "judgment jaded" by the report while he evaluates bids currently
coming in from financial advisers that want to help the state with OGB's
privatization.
"The report might tell you there's no need to privatize it," Murray said.
"That might be the case," Kipper admitted.
The report that Teague's replacement, Scott Kipper, did not want his "judgment jaded"by did, in fact, suggest that
privatization might not be the way to go.
The Legislative Auditor’s Office issued a report Monday that predicts
the Jindal administration’s plans to privatize a health insurance plan
could increase costs for state employees.
The 17-page report
characterizes the possible increased premiums as an issue that should be
deliberated before decisions are made on the future of the Office of
Group Benefits.
“The sale/lease may result in higher insurance
premiums to state employees under a private insurer because of an
increase in marketing costs, premium taxes, necessary profit margin, and
reinsurance costs,” the report states.
In his response,
Commissioner of Administration Paul Rainwater, the governor’s top budget
adviser, dismissed the possibility of higher premiums purely as a
result of privatization as speculative.
In any event, Kipper's bungling was bad enough that
he resigned shortly after his appearance at this hearing. The process of selecting a contractor moved on. Soon, state employees would wonder if
a 5 percent raise in their premium was part of a scheme to make the plan more attractive to bidders.
In 2012 the Legislature approved the outsourcing plan. The contract went to Blue Cross/Blue Shield. As, we've seen them do throughout this story, "some" criticized this entire plan as stupid and short sighted grifting. "Some" were fired.
Opponents of the measure have questioned whether those savings will
actually materialize and argued that switching to a private company to
administer health benefits will lead to increased problems for employees
filing claims.
Lawmakers have been able to delay the
privatization effort for months. Initially the Jindal administration
sought to sign the contract without the input of legislators, but that
was blocked by an opinion from the Attorney General's Office saying
state budget committees would have to sign off on the move.
The
measure then appeared on track to be rejected by the Appropriations
Committee during a joint meeting last week. Administration officials
pulled the item from the agenda before representatives could take that
vote.
Reps. Cameron Henry, R-Metairie, and Joe Harrison,
R-Napoleonville, lost their spots on the Appropriations Committee
shortly after that meeting. While both men said they believed their
opposition to the privatization at the Office of Group Benefits played a
role in their ouster, they also suggested they were being punished for
their past clashes with the Jindal administration over budget policy and
their support for a special legislative session.
Fast forward a few years and it turns out that "some" may have been right about this stuff.
By July 2014, the agency is already struggling to maintain stable financing.
The administration’s management firm — Alvarez & Marsal —
recommended changes to Group Benefits that are projected to save $1.1
billion over five years.
Johnson defended the premium reduction, saying there was no need to
keep a $500 million reserve. Group Benefits officials have said a
responsible target is between $120 million and $220 million. She said
it was inappropriate “taking employees money and banking it.”
But state Sen. Ronnie Johns, R-Lake Charles, who is in the insurance industry, disputed Johnson’s statement.
“You honestly think that was too large for 230,000 employees?” Johns
asked. “I personally believe there’s been some decision made at the
Office of Group Benefits that’s not in the best interest of the overall
stability of the program.”
Johns said he was a member of a legislative committee that had to
deal with Group Benefits finances when it was in shambles previously.
“We worked hard to get it back into a positive position,” he said.
State Rep. Rob Shadoin, R-Ruston, said the administration has a definite “PR problem.”
He said Group Benefits members point to increased premiums and
benefit reductions that are on the way and blame it squarely on the
program’s privatization.
“They say it was running great until we privatized this thing.
Whether it’s true or not, it’s the perception of some,” Shadoin said.
Johnson and McIlwain agreed that the privatization was not the
culprit in the diminishing reserves but rather an intentional act by the
administration when it reduced premiums.
Some understood from the outset that this scheme mostly amounted to an attack on an efficient and important department of state government for the benefit of favorites and corporate raiders. "Some"
wrote letters to the editor about it.
The Attorney General’s Office said before privatization could go into
effect, the legislators had to approve it. The Appropriations
Committee, by a 16-10 vote (after two members were removed from the
committee and two new ones who would vote for it were put in), approved
privatization; the Senate Finance Committee voted 10-3, and the Jindal
administration had won. State Group Benefits was privatized.
After privatization of the Office of Group Benefits, health benefits
are being cut, premiums are being raised and the $500 million trust fund
has been raided. They gave a 1.5 percent pay increase to retirees that
starts in July, and the same month a 5 percent rate increase on
insurance premiums, at a loss of 3.5 percent for the year.
This Jindal administration should be held accountable as to where the
$500 million trust fund went. Workers worked so hard to build this up,
and it’s nearly gone after two years with higher rates and less benefits
to the 250,000 families insured. This is a shame, and someone needs to
be held accountable.
No one will be held accountable. Well, state workers and retirees will, in a way. They're going to be asked to give up some benefits and pay higher premiums now in order to resolve this entirely manufactured crisis.
And, as we've already seen, this is just one of several crises our technocratic health care expert Governor has managed to leave us with. Maybe next time we'll elect "Some" instead.
*
Buddy D used to call him that. It wasn't a compliment.
