Lawmakers have given Louisiana State University (LSU) the authority to leave the state-run insurance program and buy its own coverage in a first-of-its-kind arrangement for a Louisiana public college.
University System President F. King Alexander said the move could save the Baton Rouge campus millions of dollars and allow it to get insurance more suited to its needs. The school plans a phase-in of the new authority, starting in the 2015-16 budget year that begins July 1.
Approval without objection from the Legislature’s joint budget committee was granted for a pilot program that could be replicated across other university campuses. But it first will face annual scrutiny from lawmakers.
Alexander said LSU’s flagship campus pays about twice as much as similar institutions in other states for insurance coverage. He said insurance provided through the state Office of Risk Management doesn’t include unique coverages that other colleges in other states have, like protection against cyber-security threats.
“It allows us to cater the insurance program and the risk management program to the university’s needs,” Alexander said.
LSU estimates it could save $5 million by 2020 if it takes control of its insurance coverage, though the Legislature’s financial analysts questioned the savings estimate. The Legislative Fiscal Office said the university will need to pay off about $5 million in old claims as part of its takeover of the insurance operations for its campus.
Rep. Jim Fannin, R-Jonesboro, chairman of the budget committee, said he doesn’t believe the insurance change will make much difference.
“It’s probably not necessarily a win for the state and not necessarily a win for LSU,” Fannin said. But he also didn’t oppose the idea, saying: “I’m convinced it’s not going to hurt us or the state.”
Lawmakers sought assurances that if the university had a catastrophic event, LSU wouldn’t want additional funding from the state on top of its own insurance coverage.
LSU has sought the insurance purchasing freedom since 2011, under a state law known as the Louisiana Grad Act that allows schools that reach certain performance standards to raise tuition and seek other autonomies from the state.
The university needed the backing of Gov. Bobby Jindal’s administration, which it received last December. Legislative financial analysts have been reviewing the proposal for months since then.
Legislative Fiscal Officer John Carpenter said tight monitoring will be needed since this is a new approach for university insurance coverage. He also raised questions about whether LSU will continue to meet the performance standards required under the Grad Act.
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