Title
Selection of Administrator, Specific Stop-Loss Provider, and Agent of Record for the City of Gainesville's Self- Funded Group Health Plan (B)
This item involves a request for the City Commission to approve the rankings and selection of vendors for administering, providing specific stop-loss insurance and agent services for the City's self-funded group health plan.
Explanation
Recently, the City conducted a comprehensive Request for Proposal (RFP) process to select the various components of administering and providing stop-loss insurance for the City of Gainesville's Group Health Benefit. To help with the process, the City contracted with Siver Insurance Consultants for the design of the RFP and to help facilitate the review and analysis of the various responses. The City, with the help of Siver Insurance Consultants solicited proposals for both fully insured options and all the components necessary to provide a self-funded health plan. The services solicited included, fully insured health plan options, claims and network administration for a self-funded plan, both specific and aggregate stop-loss insurance, pharmacy benefit management services and agent/broker services.
To best understand the evaluation process, a general knowledge of the various cost and risk financing components associated with 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.
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 medical claims costs and pharmacy benefit claims. The two claims components can be either administered as part of the overall administration of the plan or as separate components. 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. The final cost component is referred to as the risk transfer cost and is associated with the purchase of stop-loss insurance. Stop-loss insurance is an insurance policy that protects the group health plan from catastrophic losses. There are two types of stop loss insurance. The first is specific stop-loss; this type of insurance protects the group health plan on the individual level. With this arrangement, the group health plan is responsible for all claims payments associated with an individual insured up to a specific amount, called the specific attachment point, once the plan has paid claims to this point, all additional claims costs are reimbursed to the health plan by the insurance carrier. The City's group health plan has traditionally purchased this risk transfer tool and the current attachment point is $160,000 per individual. The second type of stop-loss insurance is aggregate stop-loss insurance. This insurance protects the group health plan if all claims paid in a given year exceed an amount specified by the carrier. This amount, also called an attachment point, is typically set as a percent of expected claims. The City's RFP asked for a 125%, the industry standard, attachment point. For example, if expected claims were estimated at $16,000,000 for the 2010 plan year, once total claims paid exceeded $20,000,000 (125% of $16 million), the carrier would provide up to $1,000,000 of coverage. The City has not traditionally purchased this type of insurance.
The RFP was distributed via Demandstar in early May 2009 and proposals were due early June 2009. The City received responses on the various components as follows:
Fully Insured Health Plans - 2 vendors responded
Self-Funded Administration - 3 vendors responded
Stop-Loss Insurance - 2 vendors responded
Pharmacy Benefit Management (*) - 4 vendors responded
Agent/Brokers - 4 vendors responded
* United Health Care, Blue Cross Blue Shield of Florida and Aetna included pharmacy benefit management in either their base quote or as a separate cost component. Only Walgreen's Health Initiatives proposed as a stand alone benefit.
An evaluation committee of five staff members, selected by GRU (2), General Government (2) and one member selected by the Group Benefits Team, evaluated all the proposal and ranked them based on the following criteria set forth in the RFP. For Fully Insured, Self-Funded Claims Administration, Stop-Loss and Pharmacy Benefit Manager the criteria was:
Cost (30 points) - Premiums for fully insured, for self insured options cost will include stop-loss terms administration fees, discounts and other costs components
Coverage (10 points) - The amounts and breadth of coverage and extent of deductibles, co-payments, co-insurance, restrictions or exclusions.
Providers (15 points) - Number and types of providers, includes both hospital and physicians. Physicians includes the number accepting new patients and the amount of displacement from the City's current provider list. Pharmacy network and mail order options.
Customer Service (25 points) - The administrative capabilities and experience of proposers. This includes such items as enrollment assistance, service responsiveness, communication with City staff on program administration, quality of billings and experience reports, Internet website, attendance at City meetings/events willingness to engage in at risk performance guarantees, wellness/disease management programs.
Reporting Services (15 points) - Monthly and annual reports of paid claims, quality of experience reports, developing adhoc reports, extent and quality of reports on wellness/disease management.
Stability (5 points) - Financial stability of proposer, A.M Best ratings, number of years in business.
References (5 points) - input received from references and the relevant experience such references displays.
While each proposal was evaluated separately on the above components, based on the proposals it was evident that to fully appreciate the various options available, the evaluation committee would have to look at both the fully-insured options and the various self-funded options in context with their stop-loss and pharmacy components. The minimum requirement to be evaluated for the self-funded option was not only an Administrative component, but there had to be a stop-loss insurance option available to the City for consideration. Of the three carriers submitting a proposal for Self-Insured Claims Administration, Aetna did not provide a stop-loss quote, nor was there a stop-loss option proposed by an independent carrier that could be layered over the Aetna proposal. It was the opinion of the evaluation committee and supported by the City's independent consultant that Aetna's proposal was incomplete, as it did not present a viable alternative for a self-funded insurance program as it would be fiscally imprudent to provide a self-funded option without a stop-loss provision.
The programs that the evaluation committee compared broke into two categories: 1) Fully insured and 2) Self-Insured. The self-insured options were Blue Cross Blue Shield as administrator with Symetra Life Insurance Company providing stop-loss insurance (two quotes at $160K and $200K) and United Health Care as both administrator and stop-loss provider (also quotes at $160K and $200K). Given the current revenue pressures on both General Government and Gainesville Regional Utilities, staff is recommending the Group Health Plan retain its current level of stop-loss insurance at $160,000 and not risk additional exposure for large claims. As such, the evaluation of total cost was conducted at the $160,000 stop-loss attachment point.
Both Blue Cross Blue Shield and United Health Care are capable of providing all the services requested and have relatively comparable provider networks. Both proposers have sufficient plan design options that would allow the City to remain flexible in plan design to address future changes in costs or demographics. The final rankings focus largely on which provider would allow the City to provide a comprehensive health plan at the lowest cost to taxpayers, rate payers and employees. A copy of the financial analysis is attached as backup. Cost analyzed included cost of administration, stop-loss insurance, the effect of the network discounts on the City's claims costs and any broker/agent cost associated with the vendors. In general, while Blue Cross Blue Shield's administrative costs were higher, when including the network discounts and substantially higher stop-loss charges for United Health Care, the Blue Cross Blue Shield proposal was ranked highest. The network discounts used in the analysis were those stated discounts provided by the vendors. The Blue Cross Blue Shield stated discounts were actually lower than the actual discount rates experience by the City's health plan for the 12 month's ending April 2009. Applying the City's actual discount percentages would only increase the differences in the total costs of the two self-insured options. The Blue Cross Blue Shield/Symetra Life option was approximately $1.9 million dollars lower than the next lowest alternative and the administration fees are fixed for a three year period and represent a reduction of approximately $220,000 annually over the current costs.
The final evaluative step was to look at the pharmacy benefit carve out. The lowest self-insured option was compared using a single administrator against carving out the pharmacy benefit management to Walgreen's Health Initiatives to determine if there were sufficient savings to warrant the additional administrative inconvenience of having two contracts to manage. The separation of the benefit would also require covered members to maintain a separate insurance card for pharmacy and reduce the health plans ability to coordinate medical and pharmacy utilization studies. It would also have the potential to complicate the coordination of pharmacy claims and medical claims paid information to the City's stop-loss carrier. Further complicating the analysis was the difficulty in determining the administrative costs associated with the Walgreen's proposal. While the base administrative costs were lower than Blue Cross, the Walgreen's proposal contained a significant number add-on charges that the evaluation committee could not accurately determine an annual cost. The final analysis revealed that the maximum savings garnered by utilizing the carve out administrator was approximately $65,000 and the savings were not sufficient to offset the additional internal administrative costs or inconvenience to our covered members.
A second set of criteria was utilized to evaluate the Agent/Broker responses, they are:
Cost - 30 points
Service/Customer Service - 50 points
Experience - 20 points
In addition to the criteria above, each carrier who provided a proposal was required to list the specific Agent/Broker authorized to represent the respective carrier. It should be noted that there was only one Agent/Broker who submitted a carrier quote (Stop-Loss) with their proposal for Agent/Broker services. The costs associated with the agent/broker ranged from a high of $185,000 to a low of $65,000. Ultimately, the agent/broker selection was a function of service provider selections for Administration and Stop-Loss insurance as there was only one Agent/Broker listed in those carrier proposals. The selected broker also happens to be the lowest cost alternative.
The final rankings of the evaluation committee are summarized below:
1. BCBS Self Insured
Administrator - Blue Cross Blue Shield of Florida, Inc.
Stop-Loss Carrier - Symetra Life Insurance Company
Pharmacy Benefit Manager - Blue Cross Blue Shield of Florida, Inc.
Agent Broker - Gallagher Benefit Services
2. BCBS- Self Insured See Note (1)
Administrator - Blue Cross Blue Shield of Florida, Inc.
Stop-Loss Carrier - Symetra Life Insurance Company
Pharmacy Benefit Manager - Blue Cross Blue Shield of Florida, Inc.
Agent Broker - Gallagher Benefit Services
3. BCBS - Fully Insured See Note (2)
Administrator - Blue Cross Blue Shield of Florida, Inc.
Stop-Loss Carrier - not applicable
Pharmacy Benefit Manager - not applicable
Agent Broker - Gallagher Benefit Services
4. UHC - Fully Insured See Note (2)
Administrator - United Health Care, Inc.
Stop-Loss Carrier - not applicable
Pharmacy Benefit Manager - not applicable
Agent Broker - Gallagher Benefit Services
Note (1) This is the same recommendation as the top ranked program. This option was scored comparing the Pharmacy Benefit Carve Out with Walgreen's vs. a single administrator.
Note (2) As fully insured options, Stop-loss and Pharmacy Benefit Manager are not applicable.
Fiscal Note
Funds of approximately $1,525,000 are included for administration and approximately $460,000 for stop-loss insurance in the Fiscal Year 2010 (EHAB) Fund.
Recommendation
The City Commission: 1) approve the rankings and selection of Blue Cross Blue Shield of Florida, Inc. as the Administrator, Symetra Life Insurance Company as the Stop-Loss Carrier and Gallagher Benefit Services as the Agent/Broker for the City of Gainesville's Self-Funded Group Health Plan for the three years beginning January 1, 2010 with an option to extend an two additional one year terms; 2) authorize issuance of purchase orders 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 three years with two annual extensions, 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.