Firm would get bonus if state agency sold

A contract signed by the Jindal administration offers a sizeable bonus to a financial firm if the privatization of a state employee health plan occurs.

Morgan Keegan & Company Inc., based in Memphis, Tenn., could make up to $900,000 if a private company successfully bids for the state Office of Group Benefits’ book of business.

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

Gov. Bobby Jindal is raising concern in some corners by exploring the idea of hiring a private company to manage a health plan that insures more than 60,000 people.

The plan — called a preferred provider organization — currently is managed by state government workers.

Jindal contends Louisiana is unique in handling health care for the state workforce. He said privatization could save the state money.

Critics counter that the office is managed well with cash reserves that stood at roughly $500 million last year. They fear that premium costs will rise under the supervision of a private company driven by profit margins.

The contract with Morgan Keegan calls for the firm to help the state “make informed decisions as to the future direction” of the Office of Group Benefits.

Morgan Keegan will be paid $150,000 to determine the office’s financial value. An ultimate privatization would net the firm an additional $350,000 to $750,000 for helping with the bidding process and contract negotiation.

State Commissioner of Administration Paul Rainwater, who is one of the governor’s top advisers, said Morgan Keegan will provide unbiased advice, despite standing to profit more from privatization than from the status quo.

“Morgan Keegan understands very well they work for us, and their job is to do an analysis that gives us the information we need to make a decision,” he said.

Rainwater’s spokesman, Michael DiResto, said Morgan Keegan made the lowest bid to conduct a financial analysis and possibly help with shifting the health plan to a private company.

DiResto said two other firms wanted between $3.5 million and $5.5 million.

James H. Lee, chairman of the Office of Group Benefits’ board of directors, said he tried to get a copy of the Morgan Keegan contract from the Jindal administration in November and was told it was not final.

Morgan Keegan’s managing director signed the contract Oct. 31. A representative with the Office of Group Benefits added her signature two days later.

Lee said he has been trying since August to gather a quorum of the board of directors to discuss the possible privatization. He said he has been unsuccessful, partly because at least one of the governor’s appointed members is absent each month. He said he will try once again to hold a meeting Feb. 15.

“Based on the scope of the contract, it is my opinion that they have the full intention of selling off OGB as quietly as possible before anyone realizes what is going on,” Lee said. “Should this happen, the active and retired employees of the state will see reduced benefits and the taxpayers will see increased costs.”

Former state Sen. Butch Gautreaux, a Democrat from Morgan City, was a vocal critic of the possible privatization before leaving office this year.

Gautreaux said he does not understand why the governor wants to tinker with a state agency that saves the state money. He said the governor might want to dismantle the government-run agency to give more weight to his bashing of President Barack Obama’s national health-care program.

“He needs to destroy it for his personal ambitions,” Gautreaux said.

Rainwater said a private company will be brought in only if it will save the state money.

“We’ve always said this is about the numbers (and whether) it makes sense to save taxpayer dollars,” Rainwater said.