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Copyright, Valley Schools 2012 PROCUREMENT VERSUS TRUST PARTICIPATION – OPTIONS IN INSURANCE BUYING Bill Munch and Andrea Billings.

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Presentation on theme: "Copyright, Valley Schools 2012 PROCUREMENT VERSUS TRUST PARTICIPATION – OPTIONS IN INSURANCE BUYING Bill Munch and Andrea Billings."— Presentation transcript:

1 Copyright, Valley Schools 2012 PROCUREMENT VERSUS TRUST PARTICIPATION – OPTIONS IN INSURANCE BUYING Bill Munch and Andrea Billings

2 Copyright, Valley Schools 2012 2 Options in Buying Insurance Public Procurement Process Contract Negotiations

3 Copyright, Valley Schools 2012 PUBLIC PROCUREMENT PROCESS Bill Munch

4 Copyright, Valley Schools 2012 4 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.

5 Copyright, Valley Schools 2012 5 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

6 Copyright, Valley Schools 2012 6 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.

7 Copyright, Valley Schools 2012 CONTRACT NEGOTIATIONS Andrea Billings

8 Copyright, Valley Schools 2012 8 Contract Negotiations 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.

9 Copyright, Valley Schools 2012 9 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.

10 Copyright, Valley Schools 2012 10 Contract Negotiations 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.

11 Copyright, Valley Schools 2012 TRUSTS AND POOLS – THE OTHER INSURANCE OPTION Bill Munch

12 Copyright, Valley Schools 2012 12 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.

13 Copyright, Valley Schools 2012 13 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 Pool 2.Arizona Counties Workers Compensation Pool 3.Arizona Health Insurance Pool 4.Arizona Local Government Employee Benefit Trust 5.Arizona Municipal Risk Retention Pool 6.Arizona School Alliance for Workers Compensation, Inc. 7.Arizona School Risk Retention Trust, Inc. 8.Behavioral Health Insurance Pool, Inc. 9.Cochise Combined Trust 10.Mohave Schools Insurance Consortium 11.Navajo County Schools Employee Benefit Trust

14 Copyright, Valley Schools 2012 14 Arizona Public Insurance Pools 12.Northern Arizona Public Employees Benefit Trust 13.RSNA Employee Benefit Trust 14.Rural Arizona Group Health Trust 15.School Construction Insurance Pool, Inc. 16.Schools Medical Insurance Trust 17.Social Service Contractors Indemnity Pool 18.Valley Schools Employee Benefit Trust 19.Valley Schools Insurance Trust 20.Valley Schools Workers Compensation Pool 21.Verde Valley Employee Benefit Pool 22.Yavapai Combined Trust 23.Yuma Area Benefit Consortium (Trust)

15 Copyright, Valley Schools 2012 COST ANALYSIS Andrea Billings

16 Copyright, Valley Schools 2012 16 Total Cost Breakdown Claims Medical Pharmacy Fixed Expenses Total Costs

17 Copyright, Valley Schools 2012 17 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

18 Copyright, Valley Schools 2012 18 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

19 Copyright, Valley Schools 2012 19 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: $54.32 VSEBT PEPM: $46.90

20 Copyright, Valley Schools 2012 20 VSEBT Fixed Expense Fee Comparison PEPM Not In VSEBT: $54.32 VSEBT 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 2 The 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.

21 Copyright, Valley Schools 2012 21 Annual Member Savings/Benefit MemberEmployeesDependentsTotal MembersAnnual Savings 2011/2012 Non-Operating Revenue Total Savings + Interest Revenue Peoria USD359216895281$575,007$125,563$700,571 Deer Valley USD339513014696$285,180$779,694$1,064,874 Chandler USD285012954145$239,400$354,848$594,248 Paradise Valley USD281121364947$236,124$569,427$805,551 Scottsdale USD23958343229$201,180$251,182$452,362 Glendale ESD11331901323$79,537$221,778$301,315 Tolleson UHSD594337931$41,699$138,894$180,593 Sierra Vista USD50964573$35,732$92,596$128,328 Queen Creek USD421218639$29,554$87,731$117,285 Littleton ESD417147564$29,273$17,998$47,272 Apache Junction USD395159554$27,729$59,992$87,721 Balsz ESD21673289$15,163$68,742$83,905 Northwest Fire District219461680NA$6,594 Litchfield ESD20799306NA$89,365 Fountain Hills USD17192263$12,004$823$12,828 Tolleson ESD16170231$11,302$46,019$57,321 Town of Queen Creek125185310NA$25,805 Total28,655$1,818,885$2,937,053$4,755,938 Counts taken from June 2012 Experience Reports

22 Copyright, Valley Schools 2012 22 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.

23 Copyright, Valley Schools 2012 23 Thank you!


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