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Politics further delay savings from plan reform

Continued confusion, in part due to politics surrounding the issue, lamentably has pushed back the proposed sale, in some fashion, of Louisiana’s state-run health care plan for its employees. It’s a loss to employees and retirees as well as taxpayers, for reasons still not entirely clear.

Commissioner of Administration Paul Rainwater announced that the timeline, originally to make any transfer occur at the beginning of the next plan year, starting Jan. 1, 2012, if it happens now would be for the 2013 plan year. (In fact, one reason why plan years were shifted on the calendar this year – until this past Jul. 1, they had run from Jul. 1-Jun. 30, necessitating a plan half-year for the last half of 2011 – was to accommodate this possibility.) No doubt the main reason dragging down the process, which would have to identify a feasible buyer acceptable to the state with time enough to take over operations, was the surprising resistance to the entire idea.

The facts are readily available about the issue, even as opponents continue to circulate claims of ignorance about them, or to avoid them entirely, or spreading misinformation about motives.
Unfortunately, the unexpected opposition creating a slowness to respond as well as a lack of clarity about what it was trying to do in its own mind has made it more difficult for the Gov. Bobby Jindal Administration to make the case to investigate the sale.

But, presuming that the Administration seeks the sale of administering the book of business, not the entire plan, this is what we know about it:
  • It takes about an extra 150 people to have the state act as its own insurer, so eliminating these positions in state government would save $10.2 million annually.
  • Because the state-run plan, known as the Preferred Provider Organization, charges on average at least five percent more than the largest plan, run by a third-party administrator and known as the Health Maintenance Organization, for essentially the same benefits the savings by replacing the PPO with HMO would be (approximated, without the precise numbers in each kind of insured category known) to employees an extra $21.2 million and to taxpayers (who pay anywhere from three to six-and-a-half times what employees pay into the premium) $33.3 million.
  • A buyer would not have access to the PPO reserves, now over $500 million, to do whatever it wants with it, because by law must be used to pay PPO claims.
  • Selling the book of business is estimated to raise as a one-time revenue $147 to $217 million for the state.
  • The Jindal Administration has said that if it gets to a point where a solicitation is made to bid on the book of business, it would reject any deal that increased premiums beyond where they currently reside, meaning if no bidder came in at or below current rates, no deal would occur.
While deal opponents like to point out the allegedly superior claims turnaround the Office of Group Benefits provides for the PPO as opposed to the performance of the HMO, currently administered by BlueCross BlueShield of Louisiana, they never admit the much higher costs associated – for a married employee without children, about $500 extra a year. They also might, perhaps in an effort to make the casual observer think that, to the contrary, the PPO is a thrifty alternative, observe the OGB Planning and Policy Board proposed to the DOA a lower increase this year than DOA (worried about actuarially estimates about fund depletion) implemented – when in fact over the past several years most of the time OGB asked for much higher rate increases than DOA ended up charging.
However, the silence becomes deafening when asking opponents that if having the state run its own health care plan, where Louisiana and Utah are the only two states that have any significant proportion of its employees and retirees in such plans, produces savings and quality, then why doesn’t the state abolish the HMO and the other smaller plans and have the state run everybody’s? Isn’t that the next logical step, because the PPO supposedly is cheaper if by definition getting the state out of it makes it more expensive? And if that’s the case, that the PPO is such a good deal, can the opponents explain why about three times as many households choose the HMO over it?

Ultimately, there is no good reason not to pursue this sale – unless, perhaps, you are an OGB employee that would lose his job, or an OGB Board (which opposed the sale) member who would lose that little bit of prestige and power, or a politician who caters to these special interests – as long as bids come in with the right specification. And the sooner the feasibility about this is known, the better. Regrettably, this misguided opposition potentially has delayed tens of millions of dollars of savings to Louisiana state employees, retirees, and taxpayers.

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