Plans are afoot to charge state government employees who smoke $600 more for their health insurance because the state can’t afford the necessary premium increases.
It’s part of a proposal being advanced by the Office of Group Benefits to come up with $24.5 million without raising insurance premiums on a quarter million state employees, teachers, retirees and their dependents. OGB oversees nine different health insurance plans for public employees.
Given the current budget crisis – legislators are trying to fill a $304 million deficit this year before tackling another expected revenue shortage next year – state government, as the employer, can’t afford to pay its portion if policy premiums were increased by the 3 percent needed, said Frank L. Jobert Jr., of the Retired State Employees Association of Louisiana and a member of the OGB governing board.
So that idea is off the table. Then legislators also shot down the idea of limiting some participants to a shorter list of doctors.
“We weren’t left with a whole lot of options,” Jobert said.
So, the board settled on a couple of surcharges and increasing the back end of out-of-pocket expenses on one of the more popular insurance policies.
In one of the boldest moves of his eight years as governor, Bobby Jindal essentially privati…
Tommy Teague, OGB’s chief executive officer, has been hustling around the State Capitol telling legislators about how the agency plans to make up the $24.5 million shortfall. The proposals have been submitted to the Senate Finance Committee and the House Appropriations Committee, which could order hearings. Otherwise, OGB has begun the routine regulatory process. The aim is to have surcharges in place by Jan. 1.
A key component of the initiative is to tack on a $50 per month surcharge for smokers on top of their regular premiums. The plan would generate an estimated $7.5 million towards the $24.5 million shortfall.
Though private insurance companies and their professional association would not say how often smokers are charged more for their insurance than nonsmokers, OGB estimates that about a third of the state’s employers have a tobacco surcharge on their health plans.
“It’s fairly common and it’s allowed under Obamacare,” Teague said.
Under the Affordable Care Act, often called Obamacare, insurers offering plans for individuals and small businesses are generally prohibited from varying a consumer’s premium rate. But they can charge smokers up to 50 percent more than the rate paid by nonsmokers.
It’s fairly controversial. While tobacco users cost an average $2,000 more in healthcare costs, critics say the surcharge drives smokers to cheaper policies that don’t cover as much or to choose not to be covered at all.
The other big issue is that people are not altogether honest about whether they smoke or not – particularly when that information comes with a cost, according to the Kaiser Family Foundation, of Menlo Park, Calif., which studies healthcare issues.
About 24 percent of the state’s adults smoke in Louisiana, according to Kaiser. But 8 percent of the enrollees in Affordable Care Act policies admitted to smoking, suggesting that almost two of 10 people were lying.
OGB will expect employees to sign an affidavit attesting to their smoking status, Teague said.
“You enforce that with some auditing after the fact,” he added. “We will put language in the rule to allow us to test for nicotine use. It’s a breathalyzer test.
OGB also wants to levy a $50 per month surcharge on spouses whose employer offers insurance but choose to go with the state’s coverage. It’s very common today for spouses with different employers to be unilaterally barred from being covered by the other's policy.
Teague said allowing the spouse the opportunity, for a price, to stay with the state insurance could actually save a family money when compared to the usual practice of having spouses buy coverage separately. The surcharge is estimated to create $3.9 million.
The third prong is called the 1 percent initiative. The plan would raise the out-of-pocket maximum on Magnolia Local Plus and Magnolia Open Access coverages by $1,000 and increase the emergency room copayment for the Magnolia Local Plus plan only.
Generally, when a patient meets his deductible, the insurer starts paying its portion of the expenses – typically 80 percent of the costs to the patient’s 20 percent. But once the patient pays a certain amount out-of-pocket, the insurance pays 100 percent of the remaining costs for the rest of the year. If the patient has a $2,500 out-of-pocket level, this change would increase that level to $3,500.
The Jindal administration chose to contract private companies to handle the day-to-day duties of the Office of Group Benefits. The state still set the premiums and for two consecutive years they were kept artificially low, which kept the amount state government had to pay low.
But the lower premiums didn't cover the escalating costs, so tapping the reserves covered the gap.
A year-old lawsuit that claims the Jindal administration mismanaged the state health insuran…
The fund balance dropped from $483 million in 2012 to $122 million in 2015. It’s now back up to $146.8 million but the insurers need to make up $122.3 million.
Expenses for medical coverage, administrative and other costs have only risen 1 percent since 2012 to a total $1.37 billion paid out in 2016 despite a 20 percent increase in the cost of prescription drugs.