Firm chosen for privatization work

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Morgan Keegan & Co. Inc. will advise the Jindal administration on a possible privatization that is stirring controversy at the State Capitol.

“This is an important first step in what will be a lengthy, careful and thorough evaluation process to arrive at the best possible policy for plan members and taxpayers alike,” Commissioner of Administration Paul Rainwater said Friday in a prepared statement.

The division’s spokesman, Michael DiResto, said Morgan Keegan, based in Memphis, was the lowest of three bidders for the job of advising the Jindal administration on whether to hire a private company to manage a state employee health insurance plan.

He said the search for a financial advisor to review the Office of Group Benefits produced three responses:

• Barclays Capital, $5.5 million.

• Goldman Sachs, $3.5 million.

• Morgan Keegan, $900,000.

DiResto said $900,000 is the maximum Morgan Keegan will receive from the state. He said the contract still is being negotiated.

The Office of Group Benefits provides health and life insurance to about a quarter-million current and retired state workers and their dependents.

Some of the office’s health plans already are outsourced to the private sector. The preferred provider organization is not and insures more than 61,000 people.

A PPO is a group of doctors, hospitals and others providing health care to subscribers at reduced rates.

The Jindal administration is exploring the possibility of privatizing the PPO.

Critics of the idea contend that premiums could increase and benefits could shrink under privatization.

The Division of Administration previously hired New Orleans-based Chaffe and Associates to determine the “fair market value” of the Office of Group Benefits.

The Jindal administration wrestled with legislators over releasing the report and only handed it over after a legislative subpoena was issued for it. The report concluded premiums would increase under privatization to maintain a pretax operating margin of 4.5 to 7 percent.

In hiring Morgan Keegan, Rainwater said the privatization will only move forward if benefits remain as they are and premium rates continue to reflect medical market rates.

He said no changes will take place before Jan. 1, 2013.

Morgan Keegan’s role, the administration said, will be to determine the “proper administrative structure” of the Office of Group Benefits.

The Jindal administration said Morgan Keegan will include contract offers from health providers in the final evaluation.

A contract cannot be awarded for the management of the health insurance plan without legislative committee approval.