Procurement versus trust participation – options in insurance buying

1. Bill Munch and Andrea Billings Procurement versus trust participation – options in insurance buying

2. Options in Buying Insurance • Public Procurement Process • Contract Negotiations

3. Bill Munch Public procurement process

4. Theoretical Intent of Public Procurements • Open, transparent and non-discriminatory procurement is generally considered to be the best. • Optimizes competition among suppliers. • To prevent waste.

5. Public Procurements • The laws in Arizona regulates procurement closely. • There are some distinct phases in the public purchasing process: • Call for bids or Request for proposals (RFPS) • Request for information, prior to bid • Bid delivery • Evaluation of the bid (awarding procedure) • Contract award

6. Public Procurements • For buying insurance, a consultant is typically hired prior to development of the RFP, which is separate RFP process. • The consultant works with the Purchasing staff and typically a selection committee. • It usually requires the procuring authority to issue public tenders if the value of the procurement exceeds a certain threshold.

7. Andrea Billings Contract negotiations

8. Contract Negotiations • Broader, more innovative, and competitively priced services and contracts. • Contract negotiations capitalize on the knowledge, capabilities, and opportunities of each party involved, making the purchase as efficient as possible.

9. Contract Negotiations • Do not have the same “limitations” as the public procurement process. Some limitations include; • When the need for a contract is urgent. • High cost of preparing a bid. • Excessive standardization restricts innovation. • Negotiated savings are not achieved. • Scope creep. • Personnel assigned to the bid committee are not familiar with the services they are charged with evaluating.

10. Contract Negotiations • When are negotiated contracts advantaged over the public entity purchasing process? • When the scope is complex. • When more information is required. • For unique and innovative proposals. • To learn what firms are willing to negotiate.

11. Bill Munch Trusts and pools – the other insurance option

12. Trust Participation • Many public entities have elected to pool together to benefit from the “best of both worlds”, and is truly a competitive bid. • Taking advantage of collective bargaining allowances under the statutory authority afforded in ARS 11-952, 11-952.01,15-382.

13. Arizona Public Insurance Pools As reported by the Arizona Dept. of Insurance there are currently as many as 23 public insurance pools operating in the State of AZ: • Arizona Counties Insurance Pool • Arizona Counties Worker’s Compensation Pool • Arizona Health Insurance Pool • Arizona Local Government Employee Benefit Trust • Arizona Municipal Risk Retention Pool • Arizona School Alliance for Workers’ Compensation, Inc. • Arizona School Risk Retention Trust, Inc. • Behavioral Health Insurance Pool, Inc. • Cochise Combined Trust • Mohave Schools Insurance Consortium • Navajo County Schools Employee Benefit Trust

14. Arizona Public Insurance Pools • Northern Arizona Public Employees Benefit Trust • RSNA Employee Benefit Trust • Rural Arizona Group Health Trust • School Construction Insurance Pool, Inc. • Schools Medical Insurance Trust • Social Service Contractors Indemnity Pool • Valley Schools Employee Benefit Trust • Valley Schools Insurance Trust • Valley Schools Workers’ Compensation Pool • Verde Valley Employee Benefit Pool • Yavapai Combined Trust • Yuma Area Benefit Consortium (Trust)

15. Andrea Billings Cost analysis

16. Total Cost Breakdown Total Costs

17. VSEBT Fixed Expense Fee Comparison • Compare like programs to accurately evaluate fixed expenses. • Self-Insured • School Districts • UnitedHealthcare • NOT participating in a Trust or Pool • Fixed Expenses • Medical Administration • Prescription Drug Administration • Stop Loss Coverage • Wellness Administration • EAP/Managed Care • COBRA Services • Consulting

18. VSEBT Fixed Expense Fee Comparison • Public Records Requests • Fees for the 2011/12 Plan Year

19. VSEBT Fixed Expense Fee Comparison • The above rates include claims administration, network usage, Stop Loss coverage, employee assistance program, COBRA administration and consulting services. • Dental, vision, and life program fees are not included in this analysis. • The consulting services PEPM is calculated based on the monthly paid invoice divided by the total employees. • Behavioral health programs vary from fully insured to self funded. • The more significant differences in programs are noted here. This analysis does not include each possible program variation, or capture every contractual difference. PEPM Not In VSEBT: $54.32VSEBT PEPM: $46.90

20. VSEBT Fixed Expense Fee Comparison District 2 • The stop loss level is $175,000 per specific loss and does not include retirees. • The number of EAP visits is 3 per issue, per lifetime. • The managed care fees/costs were not reported. • Does not include an online employee benefit/enrollment system. District 1 • The stop loss level is $225,000 per individual, plus an additional specific deductible of $200,000; does not include retirees. • Fee above does not reflect RX rebates at 80%. • The number of EAP visits is 8 per issue, per lifetime. PEPM Not In VSEBT: $54.32VSEBT PEPM: $46.90

21. Annual Member Savings/Benefit

22. In Conclusion • There are basically two options for a municipality in insurance buying – • Public Procurement/Consultant Route • Trust and Pool Route • There are major differences in the Pools/Trusts to examine.

23. Thank you!