LSU’s Baton Rouge campus on Friday became the first state college given approval to leave the state-run insurance program and buy its own coverage.
The Joint Legislative Committee on the Budget gave the go-ahead for the pilot program, which LSU executives said would cut costs and allow purchase of insurance coverage suited to university needs. LSU has sought autonomy since 2011.
“The savings will be directed back to the classroom for the benefit of our students,” said Dan Layzell, LSU’s vice president of finance and administration.
The governor’s Division of Administration previously supported the change, which has been the subject of prolonged negotiations and study. The state insurance program is in the division’s Office of Risk Management.
LSU System President F. King Alexander told the committee that LSU is paying twice as much for insurance through the state program as similar institutions in other states. He said moving to its own insurance program would reduce costs by $5 million by 2020.
In addition, Alexander said LSU would be able to purchase “unique insurance that applies only to higher education,” such as cybersecurity, student professors and undergraduate teachers coverage. He said the university has exposure today as it is bombarded by some 20,000 computer hack attempts weekly.
Alexander said he is convinced the change will “benefit LSU in the long run.”
The transfer from the state to LSU will occur by June 30, 2015.
LSU is taking advantage of a provision in the GRAD Act. The act gives colleges more autonomy in their operations as well as new ability to increase tuition, if certain performance benchmarks are met, such as graduation percentages and retention of students.
The Legislative Fiscal Office questioned the school’s ability to maintain the required benchmarks so it could keep the insurance autonomy.
The budget panel said it wanted an annual report on the status of LSU’s insurance program.
State Rep. Bodi White, R-Central, grilled Alexander and Layzell on specifics, including how many new employees would be required, as well as whether they were prepared to cover claims in excess of insurance coverage.
Layzell said LSU already has a risk management program. Two additional employees would be hired plus a $500,000-a-year third-party administrator, he said. He said LSU already has started developing a self-insurance fund from a savings it negotiated with Risk Management by increasing its deductible.
State Rep. J. Rogers Pope, R-Denham Springs, said the same concept LSU is implementing is one that has worked well in school districts.
“It will take some time to work through it, but there will be some significant savings,” Pope said.