Why is Jindal Secretly Trying to ‘privatize’ State Employee Insurance?
This story shows the continuing saga of Bobby Jindal and his penchant for doing things secretly, behind closed doors. In the past, I’ve posted other stories about this, and here is yet one more.
The insurance program for state employees is, as far as I can determine, 100% self-funded - that is, it is funded 100% from premiums charged state employees; no general fund (tax) dollars are used to pay claims. The state does offer a match - employees pay a portion of their premium, and the employer pays a portion of the premium, much like many private employers pay a portion of their employees’ insurance premiums. The state would pay a portion of state employee insurance premiums whether the insurance program was a self-funded state agency, or a private company. So there would be no “savings” there.
The program is well-run; claims are paid as promised in the plan documents, and they are paid timely. The last Director of the program (who was just recently fired) was fairly progressive in determining what coverages would be. Getting rid of the employees of the group benefits program doesn’t “save” the state any money, because the budget for the office of group benefits doesn’t include any general fund money; and the money used to pay those employees would instead go to pay administrative costs for a private company to run the program - which would, of course, include the cost of employees the private company would need to hire. Privatizing the insurance plan simply shifts the money to a private company, rather than to a state agency.
But Jindal and his people continue to insist that privatizing this function would “save” the state money.
The state’s Group Benefits program has a $500 million cash reserve. State law says this money must be spent on employee health claims. So … it would be turned over, then, to whatever private company was hired to administer the program.
State Senator Butch Gautreaux, D-Morgan City, said he believes the reserves are driving the privatization plans.
“There’s no reason for us to sell off except there’s that $500 million there,” he said.
Gautreaux sees it this way: If the plans are worth $1 billion, then the selling price will be $1.5 billion in order to sell the cash reserves as well. He said the cash exists because of initiatives overseen by Teague to lower the state’s health-care insurance costs.
For example, Gautreaux said, a weight-loss surgery program resulted in fewer prescriptions, fewer visits to the doctor’s office and fewer hospitalizations.
“I support getting rid of a state agency that doesn’t work. … But this isn’t costing the state. This is a great value,” he said.
Gautreaux said he fears that privatization will drive up costs for state workers, who already are being asked to put more of their paychecks toward their retirement savings.
Sen. Gautreaux is correct. Selling the program nets the state $1.5 billion as of the moment of the sale. But it jeopardizes the future. The state did at one time have a private company managing the employee Group Benefits; and changed it to self-managed when the service being provided was very bad, and costs kept going up.
How does getting rid of a program that doesn’t cost the state anything right now “save” money? And why is Jindal being so secretive about it?