Bill Munch and Andrea Billings PROCUREMENT VERSUS TRUST

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

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

Bill Munch PUBLIC PROCUREMENT PROCESS Copyright, Valley Schools 2012

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. Copyright, Valley Schools 2012 4

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 Copyright, Valley Schools 2012 5

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. Copyright, Valley Schools 2012 6

Andrea Billings CONTRACT NEGOTIATIONS Copyright, Valley Schools 2012

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. Copyright, Valley Schools 2012 8

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. Copyright, Valley Schools 2012 9

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. Copyright, Valley Schools 2012 10

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

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. Copyright, Valley Schools 2012 12

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 Copyright, Valley Schools 2012 13

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) Copyright, Valley Schools 2012 14

Andrea Billings COST ANALYSIS Copyright, Valley Schools 2012

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

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 United. Healthcare NOT participating in a Trust or Pool Copyright, Valley Schools 2012 17

VSEBT Fixed Expense Fee Comparison § Public Records Requests § Fees for the 2011/12 Plan Year • United. Healthcare Administrative Services Only (ASO) • • • Stop Loss Coverage Employee Assistance Program Managed Care/Behavioral Health COBRA Administrative Program Flexible Spending Account Program Consulting Services Copyright, Valley Schools 2012 18

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 Copyright, Valley Schools 2012 19

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 Copyright, Valley Schools 2012 20

Annual Member Savings/Benefit Employees Dependents Total Members Annual Savings 2011/2012 Non-Operating Revenue Total Savings + 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 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 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 Total 28, 655 $1, 818, 885 $2, 937, 053 $4, 755, 938 Member Counts taken from June 2012 Experience Reports Copyright, Valley Schools 2012 21

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. Copyright, Valley Schools 2012 22