Privatization of Louisiana Self-Insurance Program Saved $10M

Former Gov. Bobby Jindal’s privatization of claims processing and loss prevention services for Louisiana’s self-insurance program saved the state money, though less than projected, according to an audit released Monday.

The Jindal administration privatized the Office of Risk Management work in June 2010, awarding the $75 million contract to Mandeville-based F.A. Richard and Associates Inc., or FARA.

Legislative Auditor Daryl Purpera’s office said FARA – which held the privatization deal through June 2015 – saved the state $9.8 million over five years, rather than the $22 million projected by the Jindal administration.

Also, FARA fell short of a contractual savings obligation.

The company only reached $44 million of the $50 million in guaranteed claims and litigation payment savings required under the contract, according to Purpera’s office.

The audit says FARA owed the state $185,288 for not reaching the savings target, but the state only billed for $59,252 of that. The Office of Risk Management used a different calculation to determine how much was owed for falling short of the savings target.

The risk management office is Louisiana’s self-insurer, with agencies paying premiums for lines of insurance covering items such as medical malpractice, worker’s compensation cases, property damage and road hazards.

A different company now holds the risk management contract with the state.