By John Kennedy, State Treasurer

Newly discovered information is drawing back the curtain on the real reasons for sweeping health plan changes that will impact 230,000 state workers, teachers and retirees. As someone who is concerned about the state’s deeply flawed budget practices, I’m asking legislators and the legislative auditor to get involved in order to prevent burdening our Louisiana families with what is tantamount to a detrimental tax increase. Get involved now. Get involved before it’s too late. At issue is the state Office of Group Benefits, which provides health insurance to thousands of current and retired state workers, schoolteachers and their spouses and children. For years, the office operated smoothly, building up $525 million in reserves while offering fair health plans.

Things changed when the state encountered budget problems. Instead of tightening its belt, the state helped itself to the reserves. OGB is not a government giveaway program. State workers’ dollars helped build up the fund balance. The money shouldn’t be stolen from them – and, to be clear, it is being stolen from them.

How the state took the money involves a sleight-of-hand budget trick at which most accountants would shudder. Heck, even Bernie Madoff would shudder. Like other employers, the state pays 75 percent of an employee’s plan premium. In 2013 and 2014, the state intentionally – and recklessly – lowered premiums to decrease the amount of money the state had to put up so it could use the money to balance the state’s budget. Because of the lower premiums, OGB burned through its reserves. Now changes have to be made in order to save a ship that was deliberately steered into an iceberg.

State employees, retirees and schoolteachers will have higher deductibles and fewer benefits. That amounts to a virtual tax increase for Louisiana families.

This wasn’t supposed to happen. In 2011, then-Commissioner of Administration Paul Rainwater assured taxpayers OGB’s surplus would not be “stolen” (his words) or diverted to balance the budget. A few years later, current Commissioner of Administration Kristy Nichols said keeping hundreds of millions locked up in a reserve fund isn’t smart. It’s not smart for whom?

The state initially claimed it dropped premiums on the advice of its actuary. Here’s the problem: There’s always a pesky paper trail. The actuary, Buck Consultants, wrote a report, saying it didn’t recommend either decrease. Buck’s take was that the state deliberately set premium rates “artificially low to draw down the OGB’s reserve fund.”

Now the state is suggesting that the crucial rate recommendations by Buck may be in a bureaucrat’s email inbox somewhere. The state’s “looking” for the elusive emails.

It’s clear that the premium reductions were a political decision made in a political environment to free up money to balance the budget. By spurning its million-dollar actuary’s advice, the Office of the Commission jeopardized the stability of state health plans.

Now the Office of the Commissioner has made another political decision to replenish the fund balance by reducing benefits instead of increasing premiums. Remember increasing premiums would force the employer – in this case, the state – to put up additional dollars. Instead, the state is socking this solely to families.

The arrangement makes one thing abundantly apparent: A single appointed bureaucrat has far too much power over something that impacts a quarter of a million people. We need long term reform. Short term, plan members should be given the option to absorb premium increases instead of just reduced benefits. That’s how we handle the retirement systems for pensions. Is health care any less important?

Look, I’ll put my small government credentials up against anyone’s. This is not about the size of government. This is not an entitlement program. State employees put their trust – and their money – into a system that was supposed to safeguard their health insurance. Their trust was misplaced to solve political budget problems.

It’s clear that legislators need to clean up this mess, and they need to do it immediately. Ask the legislative auditor’s actuary to take a look at OGB’s plans. Ask the Public Employees Retirement Systems’ Actuary Committee to assume control of OGB.

Health coverage is too important. Let’s slow this down and get it right. We owe it to taxpayers. We owe it to the people whose lives are being affected.

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