Office of Group Benefits reserves will continue to decline in the current fiscal year even after major health plan changes, a key legislative budget panel heard Friday.
Legislative Fiscal Office analyst Travis McIlwain said the agency will dip into its reserves at a rate of $7.4 million monthly to pay claims of its 230,000 state employees, retirees, some school employees and their dependents.
The reserve account will have dropped from more than $500 million just two years ago to approximately $119 million by June 30, he said. Group Benefits actuaries recommend a reserve of between $113 million and $220 million.
Louisiana House Appropriations Committee Chairman Rep. Jim Fannin said the trend means one thing to him: another premium increase for health insurance in the next budget year. Group Benefits implemented a 5 percent increase in July as part of efforts to stabilize finances as it began changing health insurance plans and benefits offered.
The legislative money panel is keeping a close eye on Group Benefits finances because of its impact on the budget. The state pays 75 percent of premium costs for Group Benefits’ state employee enrollees as school boards do for some 50,000 members.
After the meeting, Assistant Commissioner of Administration Tom Groves said it is too early to be talking about premium increases. He said people have not made decisions on what health plan they’ll enroll in. Those decisions come in October, then the administration will look at trend numbers, he said.
“I will not be naive and tell you there would not be a premium increase,” Groves said.
Groves said the agency already improved its finances with a premium increase in July and pharmacy program changes in August, which contributed to being $18 million better off in those two months alone. “We are hoping some changes in January we are planning will have a better impact” and reduce the projected $7.4 million call on reserves.
January starts a new insurance plan year. Group Benefits members will decide in October which new plan option suits their health care needs best. The Legislative Fiscal Office has said most members will see increases in out-of-pocket expenses — some of them substantial.
Legislators said they were getting plenty of calls from people who want to know how Group Benefits got into this financial situation, necessitating changes in state health plans as well as benefits offered.
“They say we burnt through the fund balance that was theirs,” said state Sen. Dan Claitor, R-Baton Rouge. “They certainly believe it was their money that was plugged into the state budget.”
Commissioner of Administration Kristy Nichols said the reserves had built up over the years from employee and employer contributions. Reductions in premium costs for two years meant less money going into the fund as medical expenses increased and reserve funds had to be tapped, she said.
Nichols said the money did not go into the state budget.
“My name is on that budget. ... We did not take one dollar out of Group Benefits to balance the budget,” said Fannin, R-Jonesboro.
He said the reduction in the state payment toward premiums expenses did free up some state dollars that could be used for other purposes, just as it benefited plan members who didn’t have to pay in as much.
State Rep. Lance Harris, R-Alexandria, recommended that Group Benefits do a pie chart with some data that backs up where the reserve funds went.
Group Benefits officials said they would have the presentation ready for Thursday’s specially called legislative committee meeting on Group Benefits health plan changes.
Follow Marsha Shuler on Twitter, @MarshaShulerCNB. For more coverage of the State Capitol, follow Louisiana Politics at http://blogs.theadvocate.com/politicsblog.