Tuesday, August 30, 2011

Report: OGB sale could cost consumers higher premiums

Now we know why it took a legislative subpoena to pry a report about privatizing a State Office of Group benefits insurance plan from the Jindal administration.

Selling the OGB's preferred provider organization "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," in the words of a 17-page report prepared for the administration by Chaffe and Associates.

In this article by Advocate reporter Michelle Millhollon, Commissioner of Administration Paul Rainwater replies that insurance premiums regularly increase anyway, without explaining how a private company can make a profit and cover other costs that don't apply to OGB.

Legislative Auditor Paul Purpera provides his own caveat to the privatization scheme in this Associated Press article.

Aside from an increase in premiums, Purpera warns, the state legislature would no longer be able to protect employees from reductions in benefits and insurance plan changes.

"These issues," Purpora's report states, "would have to be addressed in the contract."

An interesting aside to the workings of the Jindal administration: any contract that costs $50,000 or more must undergo statutory review. The Chaffe and Associates report had a $49,999,99 ceiling.

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