The state needs an independent third party review when making financial decisions related to operations of the Office of Group Benefits health insurance program, the Public Affairs Research Council recommended in a report issued Monday.
“The decisions, as they are now made, are done internal, in one agency with a lot of preoccupation about the immediate problems in the state budget,” said PAR president Robert Travis Scott. “That’s a situation you don’t want.”
The non-profit governmental research group suggested an actuarial review and decision making by a panel similar to one that oversees state retirement system finances.
“We do think it will be a process where the decisions would be made in public, where stakeholders and the public have a chance to comment and (it’s) probably more of an objective, independent and transparent process,” Scott said.
The decision-making from such a panel would avoid situations that exist today at Group Benefits, where questions linger about the adequacy of reserves and the level of premiums necessary to keep it financially viable, PAR said.
Group Benefits insures about 230,000 state employees, teacher, retirees and their families.
In response, Commissioner of Administration Kristy Nichols said there is already sufficient “oversight” of Groups Benefits operations. She said the legislature, its auditor and fiscal office plus a Group Benefits advisory board all have oversight roles.
“We disagree with the report when it comes to concluding that a lack of oversight or transparency is to blame for the changes to OGB’s plans,” Nichols said in a statement.
Group Benefits surplus two years ago stood at over $500 million. It is less than half that today and dwindling as medical claims exceed monthly income. Instead of increasing premiums with medical claims rising, the Jindal administration reduced them by nearly 9 percent. That accelerated the depletion of the reserve account. Now, the administration is pushing a major revamp of insurance plan offerings, higher premiums and increases — some major — in out-of-pocket expense of members as part of efforts to stabilize finances.
The Jindal administration said the reserve account was too healthy and is still in the auctorial recommended range.
State government and schools boards pay 75 percent of the healthcare premium cost of employees with members picking up 25 percent. They also pay 50 percent of the premium for dependents. For retirees, the match is based on the number of years the person as an active employee.
PAR noted that state agencies have to come up with the dollars within appropriated funds to cover the insurance costs. “The premium reductions made the job of balancing the budget easier,” PAR said.
PAR recommended that the job either be given to the Public Employee Retirement System Actuarial Committee - which sets retirement contribution rates - or a panel similar to it. The panel includes the commissioner of administration, the state treasurer, the legislative auditor, a member from the House and Senate and two actuaries appointed by the pension systems. Instead of retirement system actuaries, the panel could have actuaries who deal with health insurance, the report said.
Nichols said the administration recently worked with Alvarez and Marsal and its actuarial firm to set a minimum standard for the reserve fund as suggested in PAR’s report. In addition, she said the current reserve balance has been “a key factor in determining rates for many years.”
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