A lawsuit filed in state court claims the Jindal administration illegally implemented changes to the state-operated health insurance program.
The lawsuit also alleges poor financial management by the state Office of Group Benefits, which provides coverage to about 230,000 state employees, teachers, retirees and their dependents.
Six of the affected Group Benefits members want the changes that took effect March 1 scrapped as a result of the lawsuit filed in 19th Judicial District Court in Baton Rouge.
The lawsuit claims that Group Benefits did not follow approval procedures required in state law — procedures that require prior notice and public comment — as well as violated contract and due process laws.
In addition, “The defendants have violated their fiduciary duty to the plaintiffs to prudently administer the insurance and health benefit plans for the sole benefit of state employees and retirees, particularly in their actions in depleting the $500 million (Group Benefits) fund balance, and thereafter attempting to saddle state employees and retirees with the costs and burdens resulting from their own imprudence,” the lawsuit alleges.
Baton Rouge attorney J. Arthur Smith III filed the lawsuit on behalf of Marilee Cash, Nancy Dickie, Aileen Hendricks, Rebecca McCarter, Dayne Sherman and Debra A. Thornton.
“I think it’s a good case,” Smith said. “It pretty much speaks for itself. It’s obviously a very sincere effort.”
Commissioner of Administration Kristy Nichols responded to the lawsuit with a statement, in which she said the administration acted properly.
“As the cost of health care continues to rise, the Office of Group Benefits balances the needs of its members with its financial responsibilities,” Nichols said. “The plan changes that went into effect in March followed the legally required process, including a public comment forum for members of the community, and we believe the court will recognize that.”
Group Benefits encountered financial problems after the Jindal administration reduced insurance premiums by more than 9 percent. State government and school boards pay 75 percent of the premium, so a reduction freed up dollars that could go to other budget requirements. But the premium reduction and rising health care costs ended up eating into a once healthy $500 million-plus Group Benefits reserve account. It was down to less than half of that within two years and continued to decline, threatening the financial health of the program.
“The significantly reduced state premium payments to OGB (Office of Group Benefits) meant the state effectively began using the $500 million fund balance to satisfy the state operating expense deficit and help balance the state general budget,” the lawsuit alleges. “The Legislative Fiscal Office has stated that there is a risk that by the end of the 2015 fiscal year in July, the fund balance may be zero.”
The Jindal administration embarked on a major revamp of Group Benefits, which shifted more of the program costs to its members, to stop the erosion. Deductibles, copays and other out-of-pocket expenses increased, and higher premiums are on the horizon.