Title
Selection of Blue Cross and Blue Shield of Florida, Inc. as Administrator and Gallagher Benefits Services as Agent of Record for the City of Gainesville's Self-Funded Group Health Plan (B)
This item is a request for the City Commission to approve the rankings and selection of Blue Cross and Blue Shield of Florida, Inc. and Gallagher Benefits Services to administer and act as agent of record for the City's self-funded group health plan, respectively.
Explanation
Recently, the City conducted a comprehensive request for proposal (RFP) process to select the administrator for the City of Gainesville's Group Health Benefit. The City received four responses from health insurance providers. To best understand the evaluation process, a general knowledge of the various cost and risk financing components associated providing the group health benefit are essential. The total cost of providing the health benefit can be summarized into three components: Administration, Claims and Risk Transfer Costs. This evaluation focused on the two major cost components, administration and the related network discounts impact on the cost of claims. Risk Transfer costs were evaluated in a separate process.
For the purposes of this RFP process, administration refers to the external administration of the group health plan. Services associated with administration include, but are not limited to, network development, access and administration, claims processing, customer service, plan document distribution and utilization review. The claims component can be further separated into three separate groups: inpatient services, outpatient services and physician office services. Based on our past experience, it was decided to include pharmacy benefit management as a component of the administration of the plan. The separation of the pharmacy benefit is typically referred to as a "carve out." That is, pharmacy is a separately administered and accounted for benefit. There was no discernable difference in the management and cost associated with pharmacy benefit and all responders provided a comprehensive network of pharmacies and mail order options. All vendors were able to provide the services requested.
An evaluation of the proposals based on cost, ability to provide services, network access and overall responsiveness to the RFP was conducted by staff and the vendors were ranked based on those scores. The selection of the appropriate provider is essential to a self-funded health plan that is projected to cost close to $25,000,000 next plan year. The cost of both the administrative fees and the related network discounts were extremely important as a three percent differential on network discounts adds approximately $660,000 increase in the plans total costs. These additional costs are passed on to our members and our customers.
The final rankings based on all factors were:
Vendor: Total Medical Claims and Administrative Cost:
Blue Cross and Blue Shield of Florida, Inc. $15,868,378
United Healthcare $17,018,582
Aetna $16,634,398
AvMed $18,334,991
As can be noted from the cost component, Blue Cross and Blue Shield of Florida, Inc. still has the deepest discounts in our local market. However, it is important to note that both United Healthcare and Aetna have made considerable progress in both building a competitive network and contracting for better discounts. This is good for our local area as increased competition will only result in better and more reasonable pricing going forward. The administrative fees are actually lower than the last time the City bid this service reflective of the increased competition. Any extension beyond the initial term will be subject to proposed pricing and City Commission approval.
Fiscal Note
Funds of approximately $1,350,000 are included for administration and approximately $35,000 for broker services are included in the 2015 EHAB fund budget.
Recommendation
The City Commission: 1) approve the rankings and selection of Blue Cross and Blue Shield of Florida, Inc. as the Administrator, and Gallagher Benefit Services as the Agent/Broker for the City of Gainesville's Self-Funded Group Health Plan for the five-years beginning January 1, 2015 with an option to extend one additional two-year term; 2) authorize issuance of a purchase order in an amount sufficient to cover applicable charges for the service and vendors, respectively, listed above; and 3) authorize the City Manager or his designee to negotiate an agreement with the top ranked vendors for a period of five years with one two-year extension, subject to approval of the City Attorney as to form and legality. If an agreement cannot be reached with the top ranked firm, authorize the City Manager or his designee to initiate negotiations with the next ranked firm, continuing through the rankings until an agreement is reached.