Legislators Need to Oversee Employee Health Plan Changes

Treasurer Kennedy Calls for Legislative Auditor Involvement

Treasurer Kennedy Calls for Legislative Auditor Involvement

BATON ROUGE, LA State Treasurer John Kennedy urged legislators Tuesday to oversee the Office of Group Benefits’ proposed state employee health insurance plan changes triggered by budget ploys and to seek the help of the Legislative Auditor and his actuary in making the plan changes.

“The 230,000 state employees, teachers and retirees who are insured under the OGB state health plan understand they have to sacrifice like everyone else, but the reason the plan is in trouble is because the state used the plan’s money to balance the budget. That’s not just my opinion; it’s also the opinion of the Legislative Fiscal Office. The state did the same thing with the money in the Louisiana Medicaid Trust Fund for the Elderly and the Tobacco Settlement Trust Fund. This is worse than the federal government borrowing money from the Social Security Trust Fund because there’s not even the promise of replenishing OGB’s reserves.”

OGB health plan premiums have already increased 5%. Deductibles and co-pays are also scheduled to rise under the proposed plan changes, costing the plan members $190 million a year. Much of the OGB’s $520 million reserves were used to prop up the state budget.

OGB is currently spending $16 million a month more than it takes in. The deficit was caused by a budget ploy to reduce premiums in fiscal year 2013 and fiscal year 2014 so that the state would have to pay less in employer contributions, which freed up money to use elsewhere in the budget. This caused OGB to have to spend down its $520 million in reserves to pay claims.

The state blames higher health care costs for the proposed plan changes, but according to the Kaiser Family Foundation and the Health Research and Educational Trust, as reported recently in the Wall Street Journal, the cost of employer-provided health coverage has experienced muted growth the last two years because of the nation’s economic recession. Average premiums have increased only 3% this year and 4% in 2013.

According to the state Attorney General’s office, OGB must follow the state Administrative Procedures Act in making the health plan changes. “This means that OGB must show state employees and retirees the actual details of the proposed new plans – not just Power Point presentations – and give them a chance to comment and make suggested changes,” Kennedy said. “It also means the Legislature, if it so chooses, can exercise its right to oversee the development of the proposed new plans, which the Legislature should do immediately,” Kennedy added.

Additionally, Treasurer Kennedy is urging the Legislature in its supervisory role to get the Legislative Auditor and his actuary involved. OGB claims that it lowered premiums on the advice of its actuary, New York-founded Buck Consultants.

Buck Consultants, which has been paid over a million dollars by the state for its current work for OGB, is in litigation with the city of Providence in Rhode Island over an alleged $10.8 million mathematical mistake. In 2011, Buck Consultants paid California’s Mendocino County more than half a million dollars for alleged errors in its actuary work.

“In light of Buck Consultant’s history, legislators should also ask the Legislative Auditor and his actuary to do an immediate and thorough analysis of the OGB mess, why it happened and what we need to do to solve it. At a minimum, the Legislature should ask its auditor and actuary to check the numbers of Buck Consultants and to verify the actuarial projections and basis for the new plans,” said Treasurer Kennedy. “Someone clearly steered OGB into an iceberg. I’ll put my small government credentials up against anyone, but this issue is not about shrinking the size of government. It’s about treating people fairly and with respect.”

Treasurer Kennedy also is urging the Legislature and the Legislative Auditor to offer plan participants a choice, one of which would be increased premiums without any further changes.

“That way, if you like your plan, you can keep it, with the understanding that the Legislature and the Legislative Auditor need to doublecheck Buck Consultants’ numbers on how much the increase would be,” said Treasurer Kennedy.

Contact:
Michelle Millhollon
(225) 342-0012
mmillhollon@treasury.state.la.us