Louisiana Public Worker Health Insurance Program Hemorrhaging Cash

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Despite sweeping changes enacted by Gov. Bobby Jindal’s administration, the health insurance program for state workers and public school employees will have to use $88 million from its reserve fund to cover its costs this year.

The nonpartisan Legislative Fiscal Office told lawmakers that the Office of Group Benefits will spend an estimated $7.4 million more each month on claims and operating expenses than it will receive in premium payments.

A “negative burn rate” continues even after premium hikes, service reductions and higher deductibles are put in place during the current budget year that began July 1, according to Travis McIlwain, an analyst with the fiscal office.

To cover its costs, the Office of Group Benefits will continue to deplete a reserve fund that once stood at $500 million three years ago, but that has dropped to $207 million and is expected to shrink to $119 million by the end of this budget year.

“The fund balance burn rate will be significantly reduced, but it will still be there,” McIlwain told the Joint Legislative Committee on the Budget.

Last year, the insurance program spent $16.2 million more on average each month than it brought in, and the Jindal administration pointed to the improved forecast as a sign that its changes were putting the program on a solid financial footing.

Commissioner of Administration Kristy Nichols said the reserve fund had been larger than financial analysts believed was needed, suggesting the reduced balance wasn’t cause for concern. She said the reserve will be maintained at a level considered appropriate for the insurance program.

The Office of Group Benefits covers 230,000 current state workers, public school employees, retirees and their dependents. Blue Cross and Blue Shield of Louisiana manages the health care plans that cover most of them.

The Jindal administration is making a series of plan changes to stem the financial troubles of the insurance program and address the rising costs of health care. Financial analysts say those in the insurance program in many instances will be paying more and getting less.

Nichols said the state offered health plans that were too generous and medical inflation and the federal health overhaul are driving up insurance costs. She said new insurance plans will be offered that could have some people paying less.

But the changes have been met with criticism from workers and retirees, and they have inundated lawmakers with complaints and charges of insurance program mismanagement.

“I’ve got people that are calling me that are angry,” said Sen. Dan Claitor, R-Baton Rouge.

Workers and retirees will have to choose new insurance plans in October, because all the plans are changing with the start of the new year.

Lawmakers said Friday they were concerned the changes will hit retirees especially hard, making it more difficult for them to cover their medical and prescription drug costs. Sen. Francis Thompson, D-Delhi, said the state needs to make sure its workers are protected.

“We made a commitment to these people,” he said.