Region 1 ESC

Employee

Benefits

Procurement

March 9, 2007

Who Is C-CBS?• C-CBS is the acronym for City-County Benefits

Services• C-CBS is an employee benefits consulting firm

that only works with Texas public entities.• C-CBS currently represents 42 public entities

and assists them in managing over $420 million in premium or claims dollars

• HGAC following a RFP for Benefits Consultant awarded contract to C-CBS– Employee Benefits– Property and Casualty– GASB OPEB Actuarial Analysis

C-CBS Employee Benefits Staff• Terry Hale

– Life and Health Insurance Counselor• 33 Years Employee Benefits Experience• Former Executive Director of TMLIEBP

• Bob Treacy– Life and Health Insurance Counselor

• 23 Years Employee Benefits Experience

• Burke Sunday– Life and Health Insurance Counselor

• 28 Years Employee Benefits Experience

• Cheryl Wessels– Certified Government Benefits Administrator (CGBA)

• 16 Years Employee Benefits Experience

Healthcare Costs(Per Employee Per Year)

1969: $ 242

1979: $ 623

1999: $4,821

2006: $6,629

Increases in Health Insurance (cumulative: 1988 - 2006)

0% 20% 40% 60% 80% 100% 120% 140%

Healthcare

Inflation

Wages

Increases in Health Insurance Premiums Compared to Other Indicators, 1988-2006

12.0

18.0

8.5

0.8

5.3

8.2

10.9

12.913.9

11.2

9.2

7.7

14.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

1988 1989 1990 1993 1996 1999 2000 2001 2002 2003 2004 2005 2006

Health Insurance Premiums Overall Inflation Workers' Earnings

Why Should You Expect Your Healthcare Costs To Double?

Source: Centers for Disease Control (CDC)

For Every 100 Employees

• 40-45 have high cholesterol levels

• 33 use tobacco products• 60 have high risk of heart

disease• 25 have high blood

pressure, the #1 risk factor for stroke

• 60-70 are overweight or obese

• 60 have no leisure-time activity

• 8-10 have diabetes (2-3 are unaware)

• 15 are bothered by excess stress

• 12 are heavy drinkers

Trend Factors

• Medical Inflation• Increased Technology• Increased Utilization

– HMO Plans 12.1%– PPO Plans 12.5%– POS Plans 12.1%– CDHP Plans 12.7%– Fee for Service 14.4%– Prescription Drugs 21.7%

Is This The Future?

Benefit Procurement

• Process Governed by TEC 44.031

• § 44.031 PURCHASING CONTRACTS. (a) Except as provided by this subchapter, all school district contracts, except contracts for the purchase of produce or vehicle fuel, valued at $25,000 or more in the aggregate for each 12-month period shall be made by the method, of the following methods, that provides the best value for the district:

– (1) competitive bidding;– (2) competitive sealed proposals;– (3) a request for proposals, for services other than construction services;– (4) a catalogue purchase as provided by Subchapter B, Chapter 2157, Government Code;– (5) an interlocal contract;– 6) a design/build contract;– (7) a contract to construct, rehabilitate, alter, or repair facilities that involves using a

construction manager;– (8) a job order contract for the minor construction, repair, rehabilitation, or alteration of a

facility;– (9) the reverse auction procedure as defined by Section 2155.062(d), Government Code; or– (10) the formation of a political subdivision corporation under Section 304.001, Local

Government Code.

Benefit Procurement Continued

– (b) Except as provided by this subchapter, in determining to whom to award a contract, the district may consider:

• (1) the purchase price;• (2) the reputation of the vendor and of the vendor's goods or

services;

• (3) the quality of the vendor's goods or services;• (4) the extent to which the goods or services meet the district's

needs;• (5) the vendor's past relationship with the district;• (6) the impact on the ability of the district to comply with laws and

rules relating to historically underutilized businesses;• (7) the total long-term cost to the district to acquire the vendor's

goods or services; and

• (8) any other relevant factor specifically listed in the request for bids or proposals.

Benefit Procurement Continued

• Fully Insured or Self-Funded –

Ingredients for Success!– It All Starts With the Bid Specifications or

Request for Proposals (RFP)• Proper Data & Format• Proper Evaluation Criteria• Quality of Questionnaire• Make It Easy – Not Hard

Proper Data & Format

• Fully Insured or Self-Funded– Census In Excel

• All Eligible EE - Gender, Age or DOB, Coverage (i.e. EE, EE+Sp, EE+Ch, & EE+Fm), Zip Code, & Position

– If also procuring Life with salary multiple, LTD and/or STD include salary

– Current Benefits and Provider– Employer Contribution Level(s)– Experience

• Monthly Claims and (Premium if fully insured)• Monthly Enrollment• Large Claimants Including Diagnosis

Proper Evaluation Criteria• Do Not Use Purchasing Director’s Standard

Criteria– Typical

• Price 45%• Quality 25%• Meets District Needs 15%• Past Relations 5%• Other Relevant Factors 10%

– Determine What Is Important• Price and Value• Quality of Reporting• Financial Stability• Quality of Service and Performance Guarantees

Quality of Questionnaire

• Collect Necessary General Information– Vendor Information– Contact for Questions– Name of Individual Authorized to Negotiate Final

Terms and Conditions– Certificate of Authority– Annual Financial Report/AM Best Rating/Dun and

Bradstreet Rating• Focus and Limit Questions to Evaluation Criteria

– Every Question Should Tie Back To One of the Evaluation Criteria

– Make Sure You Have Questions To Provide A Ranking for Each Evaluation Criteria

Make It Easy – Not Hard• Make Specifications and Forms Available Electronically

in Word• Make Census Available in Excel• Provide Monthly Claims (and Premium if fully insured)

Available in Excel– Need Prior Plan Year and Current Plan Year

• Provide Large Claim Information in PDF• Make Schedule(s) of Benefits Available in PDF• Give The Vendor Time

– Minimum 3 Weeks• Give yourself another 3-4 weeks to evaluate and act plus 4 weeks to

implement changes– Never have opening before 2:00 P.M.– Never have opening on Monday or day after holiday

Benefit Procurement Continued• Self-Funded

– Is It Price or Plan Cost ?• 85+% of Plan Expenses are the Cost of Claims

– Do You Want The Quote That Is 10% Less On The 15% Admin and Stop Loss or The One That Provides A 15% Better Discount On The 85% Claims Cost?

– You Determine Benefits So How Do You Evaluate Quality

• Claims Turn Around Time• Claims Payment Accuracy• Customer Service Response Time• Providers In Network• Provider Discounts• Performance Guarantees

Benefit Procurement Continued• Self-Funded

– Direct Contracts or Contracts Through TPA?• If Through TPA Make Sure Contract Discloses All TPA Revenue

– Stop Loss– PBM– Network– Hospital Audits– Out-of-Network Fee Negotiations– Subrogation

• Issue Separate RFP for Stop Loss 2-3 Weeks After RFP for Administrative Services

– Rx Formulary Rebates• Do Not Chase The Rebate

– Watch Your Bottom Line

• Discounts• Dispensing Fees

Agent Myth

• Article 4001.052 of the Texas Insurance Code states “a person with an Agent’s License works for the Insurance Company and in any dispute represents the Insurance Company not the insured.”

– Agents and Brokers Add An Unnecessary Additional Cost– Agents Say They Are Required – This is Not True– Agents Say They Will Handle Your Enrollment – Use The Savings To

Hire A Staff Person To Handle Enrollment– Agents Say They Will Resolve Claims Problems – Under The Insurance

Code An Agent Can Only Represent The Insurance Company , Not The Insured

• If You Must Use An Agent Or Broker, Control The Process By Having A Pre-Bid Conference– Vendors Dislike Receiving Multiple Copies of The Same Specifications

Who Can Assist The District?

• Article 4052 of the Texas Insurance Code provides for a Life and Health Insurance Counselor. Only a person with a Life and Health Insurance Counselor license can offer to give, any advice, counsel, make recommendations or provide information in respect to the terms, conditions, benefits, coverage or premium of any insurance policy or contract, with respect to the expediency or advisability of altering, changing, exchanging, converting, replacing, surrendering, continuing or rejecting any such policy, plan, or of accepting or procuring any such insurance policy, contract, or plan from any insurer or issuer of a health benefit plan.

When In Doubt Use A Consultant

• If You Think You May Need A Consultant– Make Sure They Have A Life and Health Insurance Counselor’s

License– Contract With The Consultant On A Flat Fee Basis– Hire The Consultant To

• Analyze Current Benefits and Plan Performance• Involve The Staff Insurance Committee, If District Has One, In

Developing Evaluation Criteria• Develop The Specifications or RFP• Manage The Procurement Process• Analyze The Proposals• Make Recommendations To Management and Board of Trustees• Monitor Implementation Process• Monitor Plan Performance

Consider Collective Purchasing

• Utilize Chapters 271 Cooperative Purchasing Program and 791 Interlocal Cooperation Act– More Continuity of Benefits Between Districts– Administrative Savings Through Consolidated Specifications– More Competition For Contract(s)

• Self-Funded Groups – Do Not Need To Share Risk– Obtain More Leverage In The Market Place

» Stop Loss» Administrative Services

• Fully Insured Groups– Need To Share Risk– Obtain More Leverage In The Market Place

It’s Time For Questions

“May I be excused? My brain is full.”

www.c-cbs.org