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Friday, 17 June 2011 11:56
Silly Louisiana PPO Politics Could Cost Taxpayers Money
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Bobby JindalThe intrigue surrounding the plan sale of Louisiana’s Preferred Provider Organization simultaneously keeps getting more convoluted and sillier, which provides considerable incentive for the Gov. Bobby Jindal Administration to move on it after the governor’s expected reelection this fall to the detriment of Louisiana’s employees, retirees, and taxpayers.

 Jindal has proposed beginning in 2012 (as the state’s benefits system for its employees is moving to a calendar year for operation starting then) to get the state out of the business of running the PPO, which serves about a quarter of state employees. Only one other state even does this with the remainder doing what Louisiana does for the other three-quarters of its employees/retirees, offer either self-insured plans run by a third-party administrator, or have them offered completely in both financing and administration by a third party. The extra 150 or so employees to run the PPO cost the state an additional $10 million annually, and the plan itself consistently has seen its rates priced about five percent higher than those of competing comparable plans, costing employees, retirees, and taxpayers (because they fund the state’s match) more.

 None of the savings, or one-time money, that would come from the plan sale were allocated into this upcoming year’s budget, and this contractual matter was one that needed only approval from the Joint Legislative Committee on the Budget if a contract was to be let. Nevertheless, it became a partisan lightning rod and a point of contention for those who put saving government jobs ahead of taxpayer’s money.

Because he seemed more concerned with keeping employees and assets under his control, Tommy Teague, head of the Office of Group Benefits, which is a part of the governor’s Division of Administration, was let go. His successor, Scott Kipper, was met with hostility by enough lawmakers to the point he decided to chuck the whole thing and resigned from state government.

 Teague subsequently charged that the Jindal Administration, in the past, told him to award a contract to one of the regional Health Maintenance Organization provider for the state, Vantage Health. It also turns out that the company donated $1,000 to the Jindal campaign in 2007, and then in 2008 one of its principals donated $5,000 and an apparent relative of him gave another similar amount last year.


 But there’s far less to this than meets the eye, a review of facts shows. The governor’s Chief of Staff, Timmy Teepell, said Teague had been resisting the private sector Vantage’s entreaties to allow them to bid on state business, as required by then newly-passed Act 479. The law requires that benefits be comparable – even though the PPO subsequently would continue to charge more – and that if “Louisiana HMOs” could offer business with competitive rates, they had to be accepted for business. 

Further, the final decision did not even rest in the hands of Teague, Teepell, or Jindal. That was left to the Board of OGB, of whom only three of its 16 members are selected by the governor, the rest being appointees of the Legislature or of various parts of state government. Vantage complied with the law, and it was duly taken on. As such, there’s no ethical breach here and seems to be the ravings of a disappointed terminated employee. 

But also controversial was the reporting of a study that would guide any decision to sell the book of business. This report claimed that that premiums, already above rates charged by Louisiana Blue Cross/Blue Shield that any sale essentially would convert the PPO into a similar kind of operation, actually would increase, which defied common sense. If a similar operation in Louisiana cost lower, and about every other state had similar arrangements that one would think if privatization cost more they would not have, how could these facts square with the alleged conclusions of the report. 

As it turns out, the report was supposed to have been kept confidential but was leaked by an unnamed senator on the Senate and Governmental Affairs Committee to the media along with a presumed interpretation of it. When it made the news, the Jindal Administration sent out the explanation: the report was based upon a premium increase that had been scheduled beginning Jul 1. (for the transition half-year) while the PPO still would be under OGB management. The figure asserted by the leaker to be the increase due to privatization, 9.2 percent, actually was the initial OGB request for a rate increase (as director, during his tenure Teague typically asked for large increases that most often were whittled down or not allowed at all by DOA), which DOA adjusted to around 5.5 percent. But as privatization would not occur until six months later, that claim was erroneous. Until actual bids come in, nobody knows whether rates would be higher (the report did mention the state could expect $146 to $217 million for the sale), a condition that if it did occur Jindal said would have him abandon the effort. 

Supposedly, all of this would have been hashed out yesterday when Commissioner of Administration Paul Rainwater had been scheduled to testify in front of Senate and Governmental Affairs. Instead, indications of Rainwater’s testimony never appeared on the agenda and the matter never came up. 

Practically speaking, of all the white noise surrounding the proposal will serve to slow down the effort, beyond any reasonable time it would take to vet it. No doubt those invested in this effort do so as part of election-year tactics to try to drum up opposition to Jindal, and the pity of it all is unnecessary delays will end up costing employees both past and present and taxpayers.

by Jeffrey Sadow, PhD.

read his blog Between The Lines

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