State’s risk agency looks at privatization

• By MARSHA SHULER
• Advocate Capitol News Bureau
• Published: Nov 7, 2009 - Page: 8A

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State government is investigating turning over operations of its self-insurance program to private business.

The Office of Risk Management is drafting a request for proposal “to evaluate the cost-effectiveness” of the move, office director J.S. “Bud” Thompson Jr. said.

Involved would be out-sourcing claims adjusting for all property, casualty and worker’s compensation claims as well as associated loss prevention activities, Thompson said.

The office manages all state insurance covering property and liability exposure and all tort claims made against the state or any state agency.

Risk Management has approximately 13,000 open claims with a net value of about $900 million and operates “just like a medium-sized insurance company,” Thompson said.

Thompson said the proposal request should go out in the next week to 10 days. He said the state hopes to have responses back by the end of March.

“The best response will be evaluated against our current operations to see if there’s truly any cost benefit,” Thompson said. “This is not a done deal that it is going to be out-sourced.”

Thompson said the analysis is being done in response to Commissioner of Administration Angèle Davis’ request to look into outsourcing more commercial oriented services of state government. Davis said the look-see is part of the effort to streamline state government. “But it is not our goal to privatize just for privatization’s sake,” Davis said in a statement.

“This will entail a careful and thoughtful review to determine where privatization makes sense in terms of providing quality service at a better cost to taxpayers, and the RFP is part of that careful review process.”

Risk Management’s total budget is $345 million, with $220 million earmarked for operations including pay-out on claims, personnel and contracts, Thompson said. He said $125 million of the budget authority involves spending excess property insurance proceeds from Hurricane Katrina.

Thompson said the request for proposals will include a requirement that current Risk Management employees be offered jobs.

“This privatization could potentially affect two-thirds of my 129 funded positions,” Thompson said.

“The employees don’t have to accept it. They can do whatever they want to do, but we want to make sure that they have the opportunity,” Thompson said.