Audit says Jindal administration privatization of risk management office has saved state $16M


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BATON ROUGE, Louisiana — Louisiana has saved nearly $16 million in the first three years of a privatization contract for the Office of Risk Management, the state's self-insurance agency, according to an audit released Monday.

Gov. Bobby Jindal's administration hired Mandeville-based F.A. Richard and Associates Inc., or FARA, in June 2010 to take over much of the Office of Risk Management's workload. The administration projected it would save $22 million over the life of the five-year, $75 million contract.

In a new report tracking the contract, Legislative Auditor Daryl Purpera's office says the state has reached 72 percent of the promised savings through June 30, 2013, the close of the last budget year.

The savings are ahead of schedule, according to the audit. State Risk Director J.S. "Bud" Thompson said the contract is on track to exceed the projections.

Agencies pay premiums to the Office of Risk Management for lines of insurance covering medical malpractice, worker's compensation cases, property damage and road hazards. Under the privatization contract, FARA handles claims processing and loss prevention services.

"I'm proud of ORM's performance and the success we have seen by privatizing the claims adjustment and loss prevention services for the state's property and casualty insurance," Jindal's top budget adviser, Commissioner of Administration Kristy Nichols, said in a statement.

The Legislature's joint budget committee agreed to the outsourcing deal when it was enacted four years ago. The contract runs through June 30, 2015.

The contract initially was supposed to cost $68 million, but it was bumped up to $75 million in 2011. Purpera's office said the privatization was accelerated because a large number of risk-management employees started leaving after the outsourcing deal was done.

By July 2013, FARA had taken over management of all nine lines of insurance that had been handled in-house by the Office of Risk Management, several months sooner than originally expected, according to the audit.

As part of the privatization deal, the risk management office cut its staff by 72 percent from 2010, dropping from 140 workers to 39 employee positions by April, auditors said.


Online:

The audit is available at http://1.usa.gov/TwPxg6

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