In less than two months, many state government employees’ paychecks will shrink to absorb a rate increase in their health insurance premiums.
The 5 percent increase is going into effect Dec. 2 despite opposition from Office of Group Benefits board members.
The Office of Group Benefits provides health and life insurance to about a quarter-million current and retired state employees and their dependents.
The board’s chairman, James H. Lee, said the office has a surplus that stood at nearly $500 million earlier this year. “They have yet to prove that they need a rate increase,” Lee said of the Jindal administration.
Lee said he tried to get board members together to voice opposition to the increase, which will be the second in less than a year. He said he could not get the necessary quorum to hold a meeting.
The rate increase, which follows a 5.6 percent hike earlier this year, comes as the administration explores hiring a private company to manage one of the office’s health plans.
Critics have accused the administration of plumping up the office’s cash reserves to make the plan more attractive to private companies.
Commissioner of Administration Paul Rainwater said the rate increases are based on experts’ advice.
He said actuarial experts told the administration and the Office of Group Benefits’ board that the office’s cash reserves would shrink by $160 million without the two increases.
“This is a very numbers-driven exercise,” Rainwater said. “It’s unfortunate, but health-care costs continue to climb.”
Office of Group Benefits board member Nancy E. DeWitt said she is perplexed by the decision to raise premiums.
“We’re already running a reserve,” she said.
Lee said the board does not have the power to overrule the premium increases.
Rainwater said he is aware of opposition from board members, who he said are in place to work in consultation with the administration.
He said there was no premium increase last fiscal year.
“We think this is a prudent increase,” Rainwater said.
He said the Jindal administration still is negotiating with Morgan Keegan on a contract to help determine the market value of the Office of Group Benefits.
The investment company also could help with hiring a private company to manage the office’s preferred provider organization.
The PPO, which insures more than 60,000 people, is a group of doctors, hospitals and others providing health care at reduced rates.
The administration’s exploration of a possible privatization is generating controversy.
Critics contend premiums will increase, a concern given weight by the Legislative Auditor’s Office and by a financial analysis performed at the Jindal administration’s request.
The Jindal administration counters that premium increases only would reflect medical market rates, as they do now.
“We’re in charge of the outcome of this process,” Rainwater said.
He said premium rates will be protected and no policy member will be excluded under privatization.
Rainwater said the administration will scrap privatization plans if they do not benefit state workers, retirees and their dependents.
This story was updated Oct. 20, 2011, to correct $500,000 to $500 million.