JOHN MAGINNIS: Jindal Tells PAR Conference What He Should Have Told Legislators

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1. Anonymous says:

   May 4, 2011 at 1:03 am

   “The rumors running amok about the sale of the health insurance plan are only to be expected from employees who are rightfully concerned about their coverage. It did not help that the administration has been slow to assure employees and legislators that premiums would not rise, benefits would not be cut and the plan’s accumulated $520 million surplus would not be plundered under any long-term contract to be signed with a private insurer”.

   “Restating that commitment in his speech, Jindal turned to the interests of taxpayers, who put up 75 percent of employees’ premiums. If a big insurance company pays $150 million or more for that book of business, the whole state would benefit from unlocking that value, which the governor has pledged not to use in this budget. That Louisiana is one of only two states to operate its own insurance plan, he told PAR, is a sound argument against the status quo”.

   The two paragraphs above read as if written by the Administration. The only possible way premiums won’t be increased or benefits cut is if the purchaser simply drained OGB’s $520M surplus to pay its claims. I’m sure this is the Administration’s plan – help out CEOs by taking advantage of the efforts of state workers.

   This would lessen a company’s risk enough to overcome the >10% administrative cost, any built in profit margin, and any taxes it would have to pay. This company could then conceivably have little or no premium increase simply by living on a diet of money built up through the sound leadership of Tommy Teague (who I wish would run for office) and OGB’s Executive Board.

   I can guarantee you one thing – long before the contract period is over this new company would be asking for more money, much as FARA is doing with its Risk Management contract (another brilliant idea). And how would that money be given? You guessed it – by raising premiums and by allowing a corresponding reduction in benefits. State legislators and employees are right to be skeptical. State retirees are right to be petrified.

   Presently, OGB’s yearly budget is $1.2B, of which approximately 95% ($1.14B) is used to pay benefits. Even giving the Administration the $150M it covets, this means that the company taking over the PPO would have 29% of its first year’s expenses simply given to it. $1.2B in premiums would still be received, but the risk would drop from 95%, at least for that first year, to around 70%. Not a bad deal if you ask me. Even I could run an insurance company and make a profit if all I had to do was collect premiums and use someone else’s money to pay 30% of the claims for most of that first year.

   Unfortunately for the state, the rest of the contract period won’t be sufficiently financed by OGB’s members to build another surplus. This means that OGB’s original 95% risk rate, having possibly dropped with no loss in benefits or increase in premiums due to the surplus, would remain at 80% – 85% over the rest of the contract life. Now do the math. How do you like it now?

   One other thing – you can bet that OGB’s cash reserve will not be used when a fair market value for OGB is “determined.” See how many companies would be interested in OGB’s “book of business” if a fair asking price were attached. This is one reason Goldman wanted to be indemnified by the state. Goldman did not want to have to contend with what would most likely be a lengthy and costly court battle.

   Concerning the 75% figure, this is money that the state has to pay regardless of who runs the PPO. So the state stands to lose money by having to pay 75% of a higher premium than it now does, once the surplus is gone.

   As for Louisiana being “… one of only two states operating its own insurance plan …” as a “… sound argument against the status quo,” this is simply unsubstantiated ideology. How many of those states run a surplus? How many run a deficit? How many are viewing OGB’s business model with an eye to incorporating some, or all, of its practices? To change an efficient, effective method of doing business for no reason other than political philosophy is not sound leadership. Any true leader would want legislatively- and/or constitutionally-mandated services run in the most efficient, cost effective manner possible, regardless of ideology.

   Of course if one had aspirations to higher public office and if that included running against such things as “Obamacare,” it would never pay to have critics point out that your own state has an extremely effective and efficient form of public healthcare. Either such aspirations have to go or OGB does.

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