Committee delays debate of OGB sale

The Joint Legislative Budget Committee was slated to discuss Gov. Jindal’s plan to sell an Office of Group Benefits health insurance plan to a private company Thursday, but cancelled the meeting at the last minute.

While spokesmen for the governor’s office said that lawmakers simply needed more time to review the proposed sale of OGB’s preferred provider organization, one lawmaker, Rep. Katrina Jackson of Monroe, said the governor lacked enough votes on the committee to approve the sale.

Response to the governor’s plan has been overwhelmingly negative – more than 4,300 people have signed a Louisiana Federation of Teachers’ petition opposing privatization (Click here if you haven’t already signed the petition!).

OGB manages the health insurance of some 60,000 current and retired public employees, including teachers and school employees in a number of school systems. It is one of the best-run and scandal-free operations in state government. In fact, it has built up a surplus of some $500 million over the past few years.

The governor claims that privatizing the office would save the state money. But according to reports, the OGB currently spends only about three percent of its income on management costs. The same costs for a private company could be in the 10% to 15% range.

Privatizing the office would probably not save money for the state, but it would eliminate the jobs of 177 public servants, putting even more Louisiana citizens in the unemployment line.

Advocate reporter Michelle Millhollon wrote this story about the meeting cancellation.

Layoffs, privatization and increased employee costs in state budget

For the fourth year in a row, Gov. Bobby Jindal proposes a state budget that freezes public education’s Minimum Foundation Program funding at the 2008-09 level.

In an effort to close a looming $895 million budget gap, the governor also plans to privatize and consolidate prisons, eliminate more than 6,000 state jobs, cut funding for health care and raise retirement costs for state employees.

While the governor says that his $25.5 billion state budget will not cut funding for higher education, that pledge depends on higher tuition for students and increased retirement costs for college and university employees.

In a memo to LSU system higher-ups, system President John Lombardi explained what he termed the Jindal administration’s “good treatment” of higher education, which has suffered hundreds of millions of dollars in cuts in recent years.

In exchange for that good treatment, Lombardi wrote, the governor expects higher education officials to “avoid negative messages about higher ed funding” and to recognize that the additional $100 million that employees will have to pay into their retirement plans is good for colleges and universities.

Areas outside of education will be hit hard to absorb the proposed cuts.

If the governor’s budget is approved, employee contributions to the Louisiana State Employees’ Retirement System will increase by three percentage points, which will equate to a cut in take-home pay.

Division of Administration Commissioner Paul Rainwater said that no changes are proposed for the Teachers Retirement System of Louisiana this year because the Jindal administration plans so many other public education “reforms.”

Some of the most governor’s controversial plans that failed last year are back in this year’s budget proposal. Once again, Jindal has plans to sell the Avoyelles Correctional Center to a private company. He also wants to fire state employees from the Office of Group Benefits and hire a private management company to manage the public employee health plan.

Baton Rouge Advocate reporter Michelle Millhollon has more on the proposed budget in this story.

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.