What to Look forin Bidding and Buying

Health InsurancePresented By

Tom LoPizzo

& Darlene Simmons

To Bid or Not To Bid

All the time… “Preparing things is my life”

Every other year… “Get a handle on where we are”

Never, never, never… “And if you want to get a bid ‘go to heck’”

Going Out to Bid

Informal vs. Formal

Go it alone or hire a consultant (several good ones in NH) Additional cost involved Choosing a consultant may require another RFP Evaluate consultant based upon “teaching the client to

go it alone” “Be careful what you wish for…” dollar decision-

making

When? Give yourself plenty of time Give those proposing plenty of time Give your employees plenty of time

Preparing Your RFP

(Request for Proposal)

Overview of your city, town, school district/SAU

Objectives of the RFP To evaluate potential administrators/insurers To provide the widest provider network

possible Select appropriate medical, Rx, ancillary

coverages Select appropriate retiree benefits (if needed) Evaluate all of the above for cost

effectiveness

Scope of work Request proposals for specific medical

plans, Rx benefits, ancillary benefits Indicate if proposal is for self-insured or

fully-insured benefits Ask for breakdown of administrative

expenses Need to know how much of each premium

dollar is spent on medical care

Important vendor questions: How long has your company/pool provided

medical benefits in NH? Who will work on account: daily

administration vs. salesperson (embellished how things will actually work)

Request any and all wellness/educational programming available and at what cost

Ask for specific costs relating to COBRA administration, retiree billing, etc.

Does TPA/Insurer pay commissions to consultants or brokers? How much?

What to include:

Plan benefit summaries Census data showing active employees

on the current plans, retirees and COBRA Claims data for the past two

calendar/fiscal yearsBreak-down by medical claims, Rx

claims, and # participants on a monthly basis

Large claim report, claims >$60,000 w/diagnosis for same period

What to include (cont.):

Copy of latest monthly bill(s) needed to compare premium to claims

Specific format requirements, due date and time

Changes/addendums in writing Number of copies required – paper and

electronic Contact person address and telephone

numbers Always include “disclaimer” Three references with permission to

call/contact

How to Evaluate Your Bids

What are you trying to find?

Cost Are the rates sufficient to cover the costs

(administration plus claims)? Commissions and other fees

Coverage Is coverage the same or different and to

what degree? Comparable provider network Employee preference Probable union issues

SAU XXX – January, 2009 Renewal Traditional Rating

A. Reported Medical Claims, 7/1/07-6/30/08, paid through 8/31/08 $2,409,145

B. Reported Caremark Prescription Drug Claims, 7/1/07-6/30/08 $544,786

C. Total Reported Claims $2,953,931

D. Claims in Excess of $100K ($397,466)

E. Net Reported Claims $2,556,465

F. Plus Medical & Prescription Drug IBNR Estimate $30,678

G. Total Rating Claims $2,587,143

H. Medical Trend $336,774

I. Pooled Claims Fee $175,435

J. LGC HealthTrust Risk Fee $73,098

K. Board Approved Return of Undesignated Members’ Balance ($78,653)

L. Anthem BCBS Administrative Fee $125,728

M. LGC HealthTrust Administrative Fee $90,641

N. Projected Member Contributions (2009) $3,310,166

O. Current Rating Contributions (2008) $3,040,427

P. Group Experience 8.9%

Q. Credibility 39.6%

R. Overall LGC HealthTrust Cycle Rate Change 0.0%

S. Credible Rate Change 3.5%

T. Reconciled Rate Change 3.9%

U. Capped Rate Change 3.9%

How rates were determined (request response in writing) Medical trend utilized All or part of individual experience Administrative cost breakdown:

Insurer administration Reinsurance cost Profit/risk margin Third party administrative cost i.e. TPA, LGC,

Primex, and SchoolCare Amount of provider discounts with insurer

vs. pure self-insured with TPA

Discounts available for participation in other programs/risk pools

Consider dealing direct with insurer or a pool

Making the Selection

Keep open your lines of communication with those proposing – ask questions and never assume

Notify winners and losers – expect to explain why you made the decision

Be prepared to make copies – formal proposals are in the public domain

Sit back, relax, and have a few beers (at home, of course)