R2007-214 AUTHORIZING CONTRACT NEGOTIATION

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difficult, if not impossible, to do a fair and accurate comparison with only one bidder willing to participate. The city's previous history of BC/BS discounts were less than the discounts in place at Consociate and Consociates have increased each year. Health care costs have risen in the years since Behnke last administered the city's health plan and, not surprisingly, the city's health care costs have also risen. In attempting to analyze the rising health care costs in the past several years, it was discovered that our employees were using the health care system at a much greater rate than in previous years when Behnke had the contract. Claims submitted by employees rose by 5,000 per year in the first years of Consociate's contract and continued to rise UNTIL the new 3 tier program was instituted. Consociate was directly involved in the efforts to determine the cause of the increase, ways to proactively address that, and in helping design the 3 tier program. The city paid an independent health insurance consultant, Segal Company, to audit the Consociate program, and that firm represented, "We believe this I relationship (with Consociate) should be maintained, assuming the city chooses �� to continue using a TPA versus an insurance company to administer the health � plan." We respectFully suggest that there is no evidence that the competing firm's program will result in any savings to the city beyond that which we hope to realize with Consociate. While Behnke has proposed a lower stop/loss amount than Consociate at a cost of $250,000 more than Consociate, this has only reached the amount they propose once in the past twenty years which is a minimal risk (5%) and one not likely to occur. It does not seem to be a prudent decision to spend an additional quarter of a million dollars for such a small risk. If there were concems regarding the discounts we are receiving through Consociate or concems regarding the level of service that Consociate has provided, we would suggest a change in providers. Staff does not want to spend any more money on health care than absolutely necessary both from the standpoint of the corporation as a whole as well as our personal interests in keeping our own personal health care costs as low as possible. We have had risk managers and insurance experts from businesses and governments involved in this process and have relied on their expertise. Since the proposals do not indicate that there will be any savings by switching providers and considering the high level of service provided by Consociate (and confirmed by the Segal firm), we do not recommend making such a change in providers.