State agencies are scrambling to figure out how to absorb a $30 million state employee health insurance premium increase.
State employees will shoulder a fourth of a 5.6 percent rate increase that the Office of Group Benefits’ board unanimously deemed unnecessary and that one legislator said is being parlayed into the Jindal administration’s possible privatization bid.
An administration official said that to go two years without a rate increase would be unusual.
Critics say the rate increase and the budget scrambling stem from an effort to plump up the office’s cash reserves as the Jindal administration pursues possibly hiring a private company to manage one of its health insurance plans.
The Office of Group Benefits provides health and life insurance to about a quarter-million current and retired state workers and their families.
The dollars that Gov. Bobby Jindal put into the budget for state agencies’ portion of the rate increase were moved by legislators before they approved the spending plan. The budget had to be rewritten after legislators rejected the governor’s proposals to sell prisons and to raise college students’ expenses.
“We made it clear we needed the $30 million in there for rate increases,” Commissioner of Administration Paul Rainwater, the governor’s top budget adviser, said Tuesday.
Rainwater could not explain why no one from the administration publicly objected when the state Senate Finance Committee grabbed the dollars to help balance the $25.3 billion budget for the spending year that started July 1.
State Sen. Lydia Jackson, D-Shreveport and vice chairwoman of the Senate Finance Committee, said legislators told the Jindal administration to take the money for the rate increases from the Office of Group Benefits’ surplus.
“Our contention was ratepayers have paid that money. That was their money,” Jackson said.
Earlier this year, the office’s reserves exceeded $520 million.
Jackson said the Jindal administration is forcing state agencies to absorb the expense because it does not want to diminish the surplus. She said the surplus is attractive to private companies that could be vying to manage a health plan that insures more than 61,000 people.
The administration recently hired a firm to advise on the possible privatization of the plan despite the controversy generated by the idea. Many fear that premium costs will further increase and that benefits will decrease under the supervision of a private company.
In May, the Office of Group Benefits’ Policy and Planning Board asked the administration to reject the premium rate increase given the size of the office’s surplus and two years of frozen pay for many state workers.
The state decided against a similar rate increase for the state spending year that ended June 30, 2011.
The board’s chairman, James H. Lee, said the office’s surplus grew to $524 million without a rate increase. “The question is if the rate increases ... are for the benefit of the program to make it better or to help the marketability of the program,” Lee said.
Rainwater said the office’s cash reserves can only be used to pay claims, not rate increases.
He said it would be unusual for premium rates to remain static for two years in a row. “In our executive budget, we built in $30 million for rate increases so we could keep a healthy fund balance,” Rainwater said.
Exactly how much state employees will pay in increases is unclear. State agencies are absorbing 75 percent of the cost for a total of $30 million.
Michael DiResto, spokesman for the Division of Administration, said it would be impossible to determine what thousands of employees will pay when they have different coverage plans and different current premiums.