In one of the boldest moves of his eight years as governor, Bobby Jindal essentially privatized the state agency that handled taxpayer-funded health insurance for a quarter million state government workers, teachers, judges, retirees and their families.
His aides in 2011 claimed the coverage would be better, more efficiently handled by the private sector. That's the way most states do and, besides, it would shrink government.
Jindal jettisoned about 150 agency employees from the state’s payroll. As lagniappe, Jindal was able to access a half-billion dollars in reserves to help shore up his budgets that were chronically short of revenues because of his tax cuts during a recessionary time.
Every journey begins with a step and the first one for Jindal back in 2011 was to fire Tommy Teague, who headed the state employee insurance program administered under the Office of Group Benefits.
On Monday, Teague returns to his old job, albeit in a much smaller agency with only a couple dozen employees.
After eight years of massive deficits and painful midyear adjustments, Gov. John Bel Edwards spent his first year trying to slow the fiscal landslide. His goal for 2017 is to install some sort of ground anchor system and slope protection on Louisiana’s unstable financial hill.
The rehiring of Teague is one of those geodetic moves Edwards has made to stabilize the situation, says Commissioner of Administration Jay Dardenne. But, it is not an indication that the Office of Group Benefits is gearing back up as a full-fledged government agency.
“That was not part of our discussion,” Dardenne said. “The change has been made. We now have to work with the way things are. We’re not going back.”
The Office of Group Benefits had operated like an insurance company: enrolling those covered, contracting physicians, administering claims, and making sure everyone got paid. And like private insurers, the agency had set aside reserves — more than $500 million worth — to ensure promises were kept.
That money was tempting to a cash-strapped Jindal administration.
But the reserves are protected by law, which Teague pointed out over and over again.
On a fairly routine day in April 2011, Teague was called into the office of then-Assistant Commissioner Mark Brady and asked to retire. He was seven months away from being eligible and refused. So Brady slid a letter across the desk terminating Teague from the $170,000 a year job.
Teague was stunned. Just like that, with no hint, no discussion, Teague was exiled.
The administration moved to sell the state agency on the private market.
Legislators howled, approving a resolution to subpoena the sitting governor to release a private banker's analysis that questioned whether the state would actually save money. State Treasurer John N. Kennedy said at the time, “We have got to get this agency out of the smoke-filled room.”
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The Jindal administration, instead, chose to contract private companies to handle the day-to-day duties of Group Benefits. The state still set the premiums and for two consecutive years they were kept artificially low. In very general terms, this meant the amount taxpayers paid for its portion of an insurance policy stayed down, Teague explained.
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But the lower premiums didn’t cover the escalating costs, so tapping the reserves covered the gap. That left Jindal free to spend that money that otherwise would have paid for health care on other expenses, Teague said.
After several hundred million dollars had been drained out of the reserve funds, state government had no choice but to increase the premiums and make other coverage restrictions. Premiums shot up several times, creating a fiscal strain not only on taxpayers but on policyholders, particularly on retirees.
“The previous administration’s plans were all smoke and mirrors. This administration already has made decisions that will strengthen the Office of Group Benefits,” Teague said last week.
Still, Teague says letting private insurers handle a lot of the state agency’s daily functions seems to be working.
“I haven’t been there in four and a half years. I come in with no preconceived notions,” Teague said. “But there are some critical functions that maybe we should be doing ourselves.”
Premium creep is just a part of health insurance — has been for decades — because the cost of medicine keeps going up. “That will continue to be the challenge,” Dardenne said.
When Dardenne and Edwards talked about who could best balance those costs and shore up the state insurance agency’s fiscal health, they said Teague’s name at the same time.
“We’ve had to address a lot of residue from the Jindal administration,” Dardenne said. “We’re not concerned how it will look by bringing him back.”
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