Once-robust state Group Benefits reserves have fallen below what the state-operated health insurance program’s financial advisers consider “safe.”
The Legislative Fiscal Office reported the fund balance sat at $102.8 million at the end of January — down from a high of more than $500 million a little more than two years ago.
The fund balance is the amount of money on hand after accounting for the medical claims incurred but not yet paid. The corresponding cash balance stood at approximately $192 million.
Office of Group Benefits actuaries have recommended a reserve of between $113 million and $220 million.
The “Focus on the Fisc” report comes as the Jindal administration prepares to implement http://theadvocate.com/news/politics/10774646-123/bobby-jindal-administration-revamps-group">health insurance plan changes aimed at stabilizing program finances.
The changes, which go into effect March 1, include higher deductibles and out-of-pocket expenses for active employees as well as a projected 11 percent increase in premiums for Group Benefits coverage beginning July 1. Pharmacy coverage also has moved to more emphasis on less-costly generic drugs.
Group Benefits provides health insurance for some 230,000 state employees, teachers, retirees and their dependents.
State government and local school boards generally pay 75 percent of premiums — so the July 1 increase will put additional stress on already ailing finances.
“They are still anticipating savings to start happening March 1,” Fiscal Office section chief Travis McIlwain said.
“But we won’t have any idea until we see March, April and May data,” McIlwain said. “The burn rate should go down but we don’t know how much.”
Group Benefits Chief Executive Officer Susan West said the decline in the fund balance is related to delays in making the insurance plan changes as well as “record claims filed in December as members met deductibles and sought services before new deductibles began in January.”
West said Group Benefits expects the decline to continue until the new plans go into effect on March 1 and the increased premiums begin on July 1.
“We expect the balance to begin to increase over the next two years,” she said in a prepared statement.
Critics blame the administration for the declining reserves, noting that it reduced premiums at a time when medical claims were escalating. Administration officials claim the premium decrease freed up dollars for other state budget spending. Commissioner of Administration Kristy Nichols has said actuaries advised that the $500 million-plus reserve was too much and lower premiums helped Group Benefits members as well as government.
The latest http://lfo.louisiana.gov/files/publications/February2015_Vol3_Issue9.pdf">Focus on the Fisc reports indicates Group Benefits expenditures exceeded revenues by approximately $104 million since the current state budget year began July 1. That translates into an average “burn rate” of $14.9 million a month. Through January, for every $1 of revenue collected, the program spent $1.14, the report said.
“To the extent the burn rate does not change, OGB’s FY15 ending year fund balance could be less than $30 million,” McIlwain wrote. “However, once the new plan design changes go into effect on March 1, 2015, the current burn rate of $14.9 million a month may be reduced.”
He projected that the changes may result in Group Benefits ending the fiscal year with a fund balance of “some amount greater than $60 million.”
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