procurement versus trust participation – options in insurance buying

Copyright, Valley Schools 2012

PROCUREMENT VERSUS TRUST PARTICIPATION – OPTIONS IN INSURANCE BUYING

Bill Munch and Andrea Billings

Copyright, Valley Schools 2012 2

Options in Buying Insurance

Public Procurement Process

Contract Negotiations


PUBLIC PROCUREMENT PROCESS

Bill Munch


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.


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


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.


CONTRACT NEGOTIATIONSAndrea Billings



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.


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.



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.


TRUSTS AND POOLS – THE OTHER INSURANCE OPTION

Bill Munch


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.


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:

1.Arizona Counties Insurance Pool2.Arizona Counties Worker’s Compensation Pool3.Arizona Health Insurance Pool4.Arizona Local Government Employee Benefit Trust5.Arizona Municipal Risk Retention Pool6.Arizona School Alliance for Workers’ Compensation, Inc.7.Arizona School Risk Retention Trust, Inc.8.Behavioral Health Insurance Pool, Inc.9.Cochise Combined Trust10.Mohave Schools Insurance Consortium11.Navajo County Schools Employee Benefit Trust


Arizona Public Insurance Pools

12.Northern Arizona Public Employees Benefit Trust13.RSNA Employee Benefit Trust14.Rural Arizona Group Health Trust15.School Construction Insurance Pool, Inc.16.Schools Medical Insurance Trust17.Social Service Contractors Indemnity Pool18.Valley Schools Employee Benefit Trust19.Valley Schools Insurance Trust20.Valley Schools Workers’ Compensation Pool21.Verde Valley Employee Benefit Pool22.Yavapai Combined Trust23.Yuma Area Benefit Consortium (Trust)


COST ANALYSISAndrea Billings


Total Cost Breakdown

Total Costs


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


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

• UnitedHealthcare Administrative Services Only (ASO)

• Stop Loss Coverage

• Employee Assistance Program

• Managed Care/Behavioral Health

• COBRA Administrative Program

• Flexible Spending Account Program

• Consulting Services


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


VSEBT Fixed Expense Fee Comparison

PEPM Not In VSEBT: $54.32VSEBT PEPM: $46.90

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.

District 2The 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.


Annual Member Savings/Benefit

Member Employees Dependents Total Members Annual Savings2011/2012

Non-Operating Revenue

TotalSavings + Interest Revenue

Peoria USD 3592 1689 5281 $575,007 $125,563 $700,571

Deer Valley USD 3395 1301 4696 $285,180 $779,694 $1,064,874

Chandler USD 2850 1295 4145 $239,400 $354,848 $594,248

Paradise Valley USD 2811 2136 4947 $236,124 $569,427 $805,551

Scottsdale USD 2395 834 3229 $201,180 $251,182 $452,362Glendale ESD 1133 190 1323 $79,537 $221,778 $301,315Tolleson UHSD 594 337 931 $41,699 $138,894 $180,593Sierra Vista USD 509 64 573 $35,732 $92,596 $128,328Queen Creek USD 421 218 639 $29,554 $87,731 $117,285Littleton ESD 417 147 564 $29,273 $17,998 $47,272

Apache Junction USD 395 159 554 $27,729 $59,992 $87,721

Balsz ESD 216 73 289 $15,163 $68,742 $83,905

Northwest Fire District 219 461 680 NA $6,594 $6,594

Litchfield ESD 207 99 306 NA $89,365 $89,365Fountain Hills USD 171 92 263 $12,004 $823 $12,828Tolleson ESD 161 70 231 $11,302 $46,019 $57,321

Town of Queen Creek 125 185 310 NA $25,805 $25,805

Total 28,655 $1,818,885 $2,937,053 $4,755,938

Counts taken from June 2012 Experience Reports


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.


Thank you!

procurement versus trust participation – options in insurance buying

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