- Associated Press - Monday, May 12, 2014

BATON ROUGE, La. (AP) - Just over two years ago, the state employee health insurance program had a half-billion dollars in reserves.

Now, The Advocate reports (https://bit.ly/1g1uUDp) the fund balance available to help cover medical claims is half that amount.

More than 250,000 state employees, their dependents and retirees as well as some school system employees rely on the Group Benefits program. While the reasons for the decline in reserves are in dispute, it occurred as the Jindal administration reduced insurance premiums and claims payments grew, eating into the fund.

Commissioner of Administration Kristy Nicholls said actuaries believe an appropriate fund balance is between $120 million and $150 million. As of Feb. 28, the balance was down by $260 million.

“It’s not our goal to get to that (lower) level,” she said. “Our goal is to reduce claims costs overall” and stabilize the situation.

Nicholls blames the reduction in reserves on increasing claims because of a “very ill state worker population.”

“You have an aging population. You have a very ill state worker population that are in a very rich plan, which is the HMO, and (there’s) not a lot of care coordination,” she said.

Nichols said there are “significant opportunities” to provide benefits to members that will lower costs. Those benefits, such as wellness programs - obesity fighting and smoking cessation - and programs to manage chronic illnesses are being implemented, she said. Pharmacy program changes have already yielded savings, she said.

Another factor in the reserves decline was that “we felt compelled to reduce costs for our members, and we have done that,” Nichols said.

Between 2012 and 2013, the administration reduced insurance premiums by 8 percent. Beginning July 1, the rates are going up 5 percent, as part of an effort to stabilize the program.

In 2013, Group Benefits collected $1.2 billion in revenues, of which 98 percent came from premiums, according to the Fiscal Office.

While the two years of premium reductions helped plan members, it helped the administration more. It reduced the state’s hefty contribution, freeing up dollars that the administration used to fund other areas of the state budget. But it resulted in fewer revenues available for Group Benefits and the tapping of reserves to pay claims.

“My fear is, if (the reserves) go too low, there will have to be a big rate increase to get it back up, or higher co-pays or reduced benefits hitting retirees and employees in their pocketbook,” said Frank Jobert, executive director of the Retired State Employees Association.

Plan members aren’t the only ones who will be on the hook. The state pays three-quarters of the insurance premiums for its employees and retirees. School boards pay the same amount.

The Legislature’s fiscal advisers deem the situation “a major budget issue.”

Jobert said the administration could not legally tap Group Benefits reserves directly, as it has done in other funds sweeps. But the premium reduction had the same effect, he said.

Legislative Auditor Daryl Purpera has auditors looking into the Group Benefits situation. If the proper insurance premium contribution rate is not computed, that leads to financial problems, he said.

House Appropriations Committee Chairman Jim Fannin also is demanding some answers.

Fannin, a legislative budget expert, said that up until last week, he had always heard that the Group Benefits reserve fund should have about $300 million.

Fannin has asked Nichols to provide the actuarial report from Buck Consulting that supports the lower figures.


Information from: The Advocate, https://theadvocate.com

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