At least the gripe session about changes to health insurance benefits of state employees, retirees, and some school board employees didn’t drag the entire Louisiana House of Representatives back, just its Appropriations Committee, and some useful information did come out about the issue. Which makes this as good as any time to reveal myths that for political reasons are being circulated about it.
In short, three years ago the fund that maintains reserves, which is the excess of monies paid in from premiums from taxpayers (typically 75 percent) and clients (typically 25 percent) over expenses was around $500 million. The Gov. Bobby Jindal Administration then decided to cut premium rates a total of 9 percent. This meant both ratepayers and the state paid less, the latter being able to use tens of millions of unused dollars in the past two budget years for other purposes. It also opted to privatize claims administration to save on bureaucratic costs. While that went into effect this year, rates also were increased 5 percent, and pharmacy benefits changed a couple of months ago that increased costs to some users. Starting next plan year (Jan. 1), while premiums are not proposed to increase, non-pharmacy benefits will change that likely means in the aggregate clients will pay more in health care costs, because of changes to co-payments, deductibles, and covered services. Meanwhile, rising costs of health care with lower premiums have put the reserve on track to go close to zero by the end of the fiscal year (Jun. 30).
Some politicians and special interests have seized upon this series of events to put forward dubious claims, none of which are true:
Myth: had the reserve remained in the $500 million area, there would not be a problem now.
Fact: Actually, having a reserve that high, over twice the industry-recommended level, was itself a problem. This meant that taxpayers and ratepayers were paying too much for the level of need, so people needlessly were being deprived of their hard-earned money. And had the rate reductions not occurred, having this much extra siphoned only would postpone the problem, because the rate of growth of these health care expenditures that is the real driver of reserve deterioration, having increased 41 percent from fiscal year 2008 while premiums barely have nudged upwards.
Myth: privatization of the Office of Group Benefits claims administration caused this reserve deterioration.
Fact: This has nothing to do with the reserve fund, as this change merely outsourced the claims administration task. Actually, the move was estimated to save about $10 million a year.
Myth: the reserve was used for other purposes that unnecessarily drained it.
Fact: Absolutely false. State law does not permit money in it to go to anything else but health care expenses through OGB. All evidence is the law was followed.
Myth: some kind of “mismanagement” has caused the situation where overall the covered population will pay more for health care after all is said and done.
Fact: Premium revenues have not kept up with expenses, with the latter side of the equation largely beyond control of policy-makers because of federal government actions and demographics. That’s because since the Patient Protection and Affordable Care Act (“Obamacare”) started taking effect individual-market premiums in Louisiana (through last year; this year’s data will be out soon) have gone up 53 percent thus generating price pressure on group rates (estimated costs to Louisiana being $24 million) and with downsizing of state government shifting the balance of covered persons more towards the older and with that more expenses. If there was any “mismanagement,” it was that costs rising so much was not anticipated which meant premiums possibly should not have been reduced – but none of employees, retirees, policy-makers, or special interests complained when rates got cut.
Myth: the Jindal Administration bears full responsibility for the deterioration.
Fact: The financial changes were part of the FY 2012 and 2013 budgets, for which every legislator that voted on both voted for at least one, and most voted for both. If legislators complain now, it means the complainers either weren’t doing their jobs properly by failing to pay attention to what they were voting on, or they voted one way when it seemed convenient and now hypocritically want the other; legislators who now complain are lazy or disingenuous, take your pick.
Myth: the changes unfairly put burdens on the insured population.
Fact: As is the case with most government employees, these get luxurious benefits for low cost. At 89 percent of all health care costs currently paid by taxpayers, the OGB current plans just qualify as “platinum” plans under Obamacare, and the cost to the payer is well below the individual market rate for those. By contrast, the typical private sector group program has the insured paying 18 percent of their costs, usually for rates no better than and often higher than an OGB payer faces. This is one of the reasons why, on average, state government workers in terms of total compensation earn 10-20 percent more than private sector workers doing similar tasks; the generosity of health care benefits. Even if as a result of the upcoming changes OGB clients pay a few percentage points more on average, (and thereby becomes an Obamacare “gold” plan), it’s still a great deal for the cost.
Alternatives for the current planned changes involve steep premium hikes. Further, given that some, but by no means all or even most, retirees may live on limited fixed incomes, some reconceptualization of their rates and/or benefit structures may be in order. But, in contrast to what has been planned, there has not yet come forward an alternative that both asks for an appropriate amount of the people’s resources to subsidize a generous set of health benefits and for those beneficiaries of these benefits to pay their fair share.