Bill Munch and Andrea Billings
PROCUREMENT VERSUS TRUST
PARTICIPATION – OPTIONS IN
INSURANCE BUYING
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Options in Buying Insurance
 Public Procurement Process
 Contract Negotiations
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Bill Munch
PUBLIC PROCUREMENT
PROCESS
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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.
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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
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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.
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Andrea Billings
CONTRACT NEGOTIATIONS
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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.
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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.
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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.
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Bill Munch
TRUSTS AND POOLS – THE
OTHER INSURANCE OPTION
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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.
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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.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Arizona Counties Insurance Pool
Arizona Counties Worker’s Compensation Pool
Arizona Health Insurance Pool
Arizona Local Government Employee Benefit Trust
Arizona Municipal Risk Retention Pool
Arizona School Alliance for Workers’ Compensation, Inc.
Arizona School Risk Retention Trust, Inc.
Behavioral Health Insurance Pool, Inc.
Cochise Combined Trust
Mohave Schools Insurance Consortium
Navajo County Schools Employee Benefit Trust
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Arizona Public Insurance Pools
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
Northern Arizona Public Employees Benefit Trust
RSNA Employee Benefit Trust
Rural Arizona Group Health Trust
School Construction Insurance Pool, Inc.
Schools Medical Insurance Trust
Social Service Contractors Indemnity Pool
Valley Schools Employee Benefit Trust
Valley Schools Insurance Trust
Valley Schools Workers’ Compensation Pool
Verde Valley Employee Benefit Pool
Yavapai Combined Trust
Yuma Area Benefit Consortium (Trust)
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Andrea Billings
COST ANALYSIS
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Total Cost Breakdown
Claims
Medical
Pharmacy
Fixed
Expenses
Total Costs
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VSEBT Fixed Expense Fee
Comparison
 Compare like programs
to accurately evaluate
fixed expenses.
Fixed Expenses
• Medical
Administration
• Prescription Drug
Administration
• Stop Loss Coverage
• Wellness
Administration
• EAP/Managed Care
• COBRA Services
• Consulting




Self-Insured
School Districts
UnitedHealthcare
NOT participating in a
Trust or Pool
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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
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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
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VSEBT Fixed Expense Fee
Comparison
District 1
 The stop loss level is $225,000 per
individual, plus an additional specific
deductible of $200,000; does not
include retirees.


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.
Fee above does not reflect RX
rebates at 80%.

The managed care fees/costs
were not reported.
The number of EAP visits is 8 per
issue, per lifetime.

Does not include an online
employee benefit/enrollment
system.
PEPM Not In VSEBT: $54.32
VSEBT PEPM: $46.90
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Annual Member Savings/Benefit
Total
Savings +
Interest
Revenue
Employees
Dependents
Total Members
Annual Savings
2011/2012
Non-Operating
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
Glendale ESD
Tolleson UHSD
Sierra Vista USD
Queen Creek USD
Littleton ESD
2395
1133
594
509
421
417
834
190
337
64
218
147
3229
1323
931
573
639
564
$201,180
$79,537
$41,699
$35,732
$29,554
$29,273
$251,182
$221,778
$138,894
$92,596
$87,731
$17,998
$452,362
$301,315
$180,593
$128,328
$117,285
$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
Fountain Hills USD
Tolleson ESD
207
171
161
99
92
70
306
263
231
NA
$12,004
$11,302
$89,365
$823
$46,019
$89,365
$12,828
$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
Member
Counts taken from June 2012 Experience Reports
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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.
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Thank you!
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