PORT OF SEATTLE

MEMORANDUM

SUBJECT: Claims Administration Services Contracts for the Port Sponsored Medical and Dental

Plans

Amount of This Request: Estimated at $1,350,000

Source of Funds: Various Operating and Capital Funds

Estimated Jobs Generated: 14

ACTION REQUESTED:

into new one-year contracts with Premera (for medical claims administration services) and Washington

Dental Service (WDS) (for dental claims administration services) from January 1, 2012, through

December 31, 2012, with a total cost for both contracts not to exceed $1,350,000;

OR, AS AN ALTERNATIVE:

(B) Direct Port staff to return the Port sponsored medical and dental plans to fully insured status and

secure medical and dental coverage through an insurance product. Insurance products do not require

the Request for Proposal (RFP) process so medical and dental insurance products could be selected and

put in place by the end of 2011.

The process of selecting claims administrators for the Port sponsored medical and dental plans is far

more complex than was originally envisioned. The process of developing the Request for Proposal

COMMISSION AGENDA

(RFP) materials and preparing for the competitive selection process is also taking much longer than

Through the competitive selection process, the Port must be able to assess the implications of selecting

any of the eventual bidders as thoroughly and completely as possible. Balancing these three

requirements is requiring the Port’s HRD, Legal, and CPO staffs, as well as the Port’s benefits

consultant, to review options and alternatives to ensure that the RFP is issued in a way that is public

and transparent, does not disclose any information that could possibly be considered PHI, and still

provides potential bidders with detailed enough information to permit the Port to accurately assess the

implications of the proposals on health care costs and availability of network providers to employees

covered by the Port sponsored plans.

HRD, Legal, and CPO staff have concluded that the Port will not be able to issue an RFP that meets

the competitive process of selecting providers of such services for 2013.

BACKGROUND:

Beginning in 2011, the Port converted the Port-sponsored non-HMO medical and dental plans from a

fully insured model to a self-insured model. Cost containment was a major factor in the decision to

convert from fully insured health plans. Self-insured plans are not subject to some of the taxes that

insured plans are, and sponsors of self-insured plans have more flexibility in how their plans are

designed than fully insured plan sponsors do.

The process of selecting a claims administrator is an intricate and complex process. Benefits

consultants often receive bids directly from claims administrators for their clients undertaking a

competitive selection process. This permits the consultant to ensure that only fully qualified bidders

receive the detailed information necessary to submit a proposal, and the information is often

distributed directly from the consultant to pre-qualified bidders. This process ensures that only entities

that have a legitimate need for detailed information about claims, provider utilization, employee zip

codes, or other information that must be protected are permitted access to the information.

COMMISSION AGENDA

With the public competitive selection process the Port must utilize, those working to develop the RFPs

When we requested the exemption from competition in 2010 for 2011 claims administration services,

we believed that the process would require a thorough and detailed RFP. We did not fully appreciate

the complexities associated with issuing the RFP in a way that would comply with the varied and

almost conflicting requirements, nor did we not realize the amount of time it would take to develop

RFP materials that would comply with the various requirements. As we worked to develop the RFP,

and became increasingly aware of these different requirements, we developed an appreciation for the

complexities and recognized that we need more time to ensure that the RFP will meet all the

requirements it must meet.

beginning of a calendar year, have the administrator selected and all information about changes

communicated to employees by September of the preceding year.

Because of the time required to facilitate a change, we will need another year to develop a fully

compliant RFP, thoroughly complete the selection process, and potentially transition to new claims

administrators.

providing an equal and open opportunity to qualified parties and culminating in a selection based on

criteria, in which criteria other than price may be the primary basis for consideration.”

process by the commission when it has been determined that a competitive solicitation process is not

appropriate or cost-effective”, RCW 53.19.020(5).

COMMISSION AGENDA

For the proposed contracts to fall under the exemption in RCW 53.19.020(5), the Commission must

We are requesting that the Commission consider the following circumstances and make the

determination that subjecting the proposed contracts to competitive solicitation requirements would not

be cost-effective or appropriate for calendar year 2012:

1. A competitive process is still the goal for selecting claims administrators for the Port sponsored

information is obtained to make a well-informed selection. It will also help ensure that the RFP is

issued in a way that does not disclose any protected health information and therefore does not

expose the Port to any HIPAA liability.

3. Claims administration services are essential to self-funded health plans. Without claims

administrators, the Port cannot maintain self-insured health plans as there would be no way to

administer claims incurred under the plan. Without the requested additional time to complete the

claims administration RFPs and selection processes, the Port would be required to secure medical

and dental coverage through an insurance product.

PROGRAM COST:

The estimated cost for one year is (1) $1,200,000 for medical claims administration services in 2012;

and (2) $150,000 for dental claims administration services for 2012. The Port pays claims

administration fees on a per employee per month basis so the actual cost will partially depend on the

total number of employees and retirees covered by the Port’s self-funded medical and dental benefit

plans.

COMMISSION AGENDA

dental plans through 2012 and complete competitive selection processes in 2012 with the selected

claims administrators assuming the role in 2013 under multi-year contracts. This is the

2) Return the Port sponsored health plans to fully insured status beginning in 2012. While medical

and dental insurance products could be in place to take effect by January 2012, there is not sufficient

time to conduct a thorough review available alternatives so for 2012, the Port would very likely

purchase insurance products from Premera for medical coverage and WDS for dental coverage that

would be very similar to the current self-insured plans.