They've got muck; we've got rakes. TPM Muckraker
The administration has said that privatizing OGB will net a big upfront payment, perhaps as much as $150 million, and save millions of dollars a year. Officials have further argued that privatization would only really affect the 62,000 OGB members who participate in the agency's self-funded and self-administered preferred provider organization (PPO) program. But critics have countered that OGB is well-run overall, and have worried that a private company would raise premiums for members of the PPO. Some have raised questions about the fate of OGB's $500 million surplus fund.
In a section laying out privatization scenarios, the report states "in addition" to a planned premium increase instituted by OGB pre-sale, Chaffe's valuation of the agency assumes that a purchaser will increase premiums to maintain a pre-tax operating margin of 4.5-7%. The premium increase in 2013 would range from 4.8% to 7.6%, depending on the operating margin the private company was seeking, the report's analysis states.
The leak to the Advocate has leant ammunition to critics of the administration's plan.
"Premiums will rise and coverages will lessen," state Sen. Butch Gautreaux (D) told TPM in an email. "The cost of doing business will rise by more than 10 per cent and profits will have to include corporate taxes and ROI [return on investment] to stockholders."
But the administration strongly disputed the Advocate's conclusion.
"It's a falsehood," Division of Administration spokesperson Michael DiResto told TPM in an email Tuesday morning. "The Advocate printed a falsehood, and will be requesting a correction."
As of press time, the Advocate report had not been altered.
The Chaffe report became an issue at a state Senate committee confirmation hearing on June 1. State senators there grilled OGB chief Scott Kipper and Commissioner of Administration Paul Rainwater about the report, and even got Kipper -- who had not to that point seen the report -- to admit that it might conclude that privatization was not necessary. (Kipper turned in his resignation a few days after the hearing.)
Lawmakers also pressed Rainwater for access to the report, and he promised to send them copies, while dismissing its findings as a "validation of what we already thought." He later went back on his pledge, telling a local news station that releasing the report could cause "problems" for the sale process. The senators then raised the prospect of a legislative subpeona, prompting Rainwater to hand over the document, with a request that it be kept confidential.