COMMISSION
AGENDA MEMORANDUM

Item No.

ACTION ITEM

Date of Meeting

DATE:

August 04, 2026

TO:

Stephen P. Metruck, Executive Director

FROM:

Sandra Spellmeyer, Manager, HR Total Rewards
Kecia Reichstein, Director, HR Total Rewards

8i
August 11, 2026

SUBJECT: Contract to Provide Medical Claims Administration Services for the Port's SelfInsured Medical Plans
Amount of this request:

$14,000,000

ACTION REQUESTED
Request Commission authorization for the Executive Director to advertise, award and execute up
to a 10-year contract valued at $14,000,000 dollars with a Medical Claims Administrator for the
Port's self-insured medical plans for Port employees. This will be for administrative services to
review and pay medical claims, manage contracts with a network of providers, and provide
ancillary healthcare services that will promote efficient and convenient medical care offerings.
EXECUTIVE SUMMARY
The Port has self-insured its non-HMO medical plans since 2011. This funding arrangement is
more cost effective for the Port than a fully insured option as we only pay for claims actually
incurred and the administrative cost to process and pay those claims. The Port also has more
flexibility with benefit offerings under a self-insured plan as we establish the plan design best
suited for covered Port employees rather than selecting from among plans offered by various
insurance companies.
Maintaining self-insured plans requires the Port to contract with a Medical Claims Administration
vendor, also known as a Third-Party Administrator (TPA), to review and pay medical providers on
behalf of the Port's covered employees. They also maintain a network of providers that they
have negotiated rates with, which saves the Port and our covered employees money as these
negotiated rates typically represent significant discounts. In addition, the TPA often provides
ancillary healthcare services to the Port and its covered employees that will promote efficient
and convenient medical care offerings for employees and their families covered by the Port's
medical plans.

Template revised January 10, 2019.

COMMISSION AGENDA - Action Item No. 8i
Meeting Date: August 11, 2026

Page 2 of 5

The current medical claims administration contract expires at the end of 2027. Our goal is to
execute a contract by the first quarter of 2027, to be able to factor in any change to cost
associated with the new agreement into the 2028 budget and have ample time to implement and
communicate any changes with employees for the fall 2027 open enrollment period for a January
1, 2028, contract execution.
JUSTIFICATION
A self-insured medical plan is more cost effective than a fully insured plan. For various reasons,
including state premium taxes and profit margins of insurance companies, the cost of a selfinsured medical plan is typically 5% to 10% less than a fully insured plan. In addition to the cost
savings, employers with self-insured plans have more flexibility determining what benefits are
covered, how they are covered and what deductibles, coinsurance, and copays are for their plans.
This permits the Port to customize the Port's medical plans to align goals for a healthy workforce
and cost containment strategies. The approximate cost of our 2027 self-insured medical plans is
$21.2 million, which includes the claim cost. Self-insuring these saves the Port $1.06 million to
$2.12 million annually.
DETAILS
A competitive selection process is required by Port policy. The selection process will seek to
minimize the disruption employees, and their families will experience by having their current
doctors being 'out of network' with the new TPA and by seeking a TPA who can administer the
Port's current medical plan design. The selection process will also seek to consider the customer
service levels of the proposing TPAs and ensure a positive customer service experience for Port
employees when they must contact the TPA.
Claims administrators are paid a monthly fee per enrolled employee. While we cannot know
what the proposed fees will be, we are projecting slight fee increases, 3-5% after the first 5-year
rate guarantee, in the cost estimates. The larger impact on the total cost of the contract is the
number of employees covered by the Port's self-insured plans. Projected new FTEs that may be
requested over the next ten years are factored into the cost estimate for the duration of the
contract. Currently we have 1450 eligible employees for Port Sponsored Healthcare, which
includes non-represented, represented, and some temporary employees. The remaining 950
Port employees are represented and have benefits through their union trust.
Scope of Work
The contracted TPA will maintain and communicate a network of providers who will provide
medical services to cover Port employees and their families at negotiated rates that are less than
the providers' standard billing rates. They will also receive claims, review them to see if they are
for covered services and, if they are, determine the Port's and employees' shares of the cost and
pay the providers. The TPA may also provide ancillary services like a Disease Management
program, 24-hour Telehealth services, Nurse Case Management program, or other services

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA - Action Item No. 8i
Meeting Date: August 11, 2026

Page 3 of 5

related to providing efficient and cost-effective medical care to Port employees and their covered
family members.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 - Change the funding mechanism for these plans from a self-insured arrangement
to a fully-insured arrangement.
Cost Implications: Over a 10-year contract the Port could pay estimated average of 15.9 million
more for fully insured medical plans than for self-insured plans. This additional cost is due to the
premium tax imposed by the State of Washington on fully insured plans as well as profit margins
and risk charges built in to fully insured plans.
Pros:
(1) Fully insured plans are easier for staff to administer than self-insured plans:
•
•

procurements for claims administration services are not necessary,
reporting the financial status of our plans to the State is not required with fully
insured plans, and

(2) The risk of catastrophic claims is borne by the insurance company rather than the Port so
separate supplemental risk insurance to protect the Port from this financial exposure is not
necessary.
Cons:
(1) The Port would not realize the full benefit of employees' careful attention to their health
and judicious use of healthcare services as we would pay a fixed premium to the insurance
company that is based on expected claims costs. With self-insured plans, we pay only for
actual claims costs.
(2) Fully insured plans cost more than self-insured plans, primarily because of the state's
premium tax.
This is not the recommended alternative.
Alternative 2 - Perform the proposed contracted work in-house.
Cost Implications: Over the course of a 10-year contract, the cost of performing this work inhouse would exceed the cost of contracting with a TPA by an estimated $10.9 million. This is a
very rough estimate that assumes many variables.
•

Network access fees estimated average over 10 years of $95.57 per employee per month
total $1,376,223 annually. This would likely result in a smaller network of providers for
Port employees to access and smaller discounts/higher claims costs for both the Port and
covered employees.

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA - Action Item No. 8i
Meeting Date: August 11, 2026
•
•

•

Pros:
(1)
Cons:
(1)
(2)
(3)

(4)
(5)
(6)
(7)

Page 4 of 5

Ancillary services at estimated average over 10 years of $15.69 per employee per month
total $225, 983 annually.
Staffing costs are estimated at an average over 10 years of $829,316 annually. This is
based on an estimate of 5 employees to review, process and pay claims as well as resolve
claims questions and issues with providers and fulfill the customer service function for
both employees and providers.
The Port would need to purchase or develop a claims administration system. Our
consultant provided a very rough estimate of $1.5 million to secure the necessary system.
Not included in this cost are expenses associated with updating and maintaining the
system, as provider fees and plan designs change.
The Port would have total control over services provided for covered employees and
family members.
Port staff would need to contract with vendors through a competitive selection process
to provide utilization review, disease management, and other services requiring highly
specialized skills.
The Port would not have the economies of scale that vendors who are in the business
of providing these services would have. This would mean the fees the Port would pay
would be higher.
The volume of claims administration work can vary from week to week for the Port's
relatively small number of covered employees so ensuring staff was fully engaged at all
times could be a challenge. Employees would have great concern about confidentiality
of personal health data if their medical claims were processed by other Port employees.
The Port would need to purchase claims processing software and equipment to produce
member identification cards.
Port would need to provide a highly secure area for the hired staff and the medical
claims records.
The time required to define needed jobs and hire qualified staff would be significant.
This alternative is considerably more expensive than the current claims processing
arrangement.

This is not the recommended alternative.

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA - Action Item No. 8i
Meeting Date: August 11, 2026

Page 5 of 5

Alternative 3 - Continue to contract with third party administrators to provide these services to
the Port.
Cost Implications:
Approximately $14 million over 10 years.
Pros:
(1)
(2)
(3)
Cons:
(1)
(2)

Contracting with a TPA for medical services simplifies obtaining all necessary elements
of healthcare administration as the TPA would develop and manage the provider
network, process all claims, and provide specialty services.
This alternative allows the Port to capitalize on a TPA's broad-based knowledge and
expertise to the benefit of our plans, and the employees and family members covered
by them.
This alternative permits Port staff to focus on strategic work in the area of health
benefits rather than operating its own "insurance" company.
The work required to carefully craft procurement materials, review proposals and select
vendors who best meet the needs of the Port, its health plans and the employees
covered by them are significant.
Staff time to manage the relationship with the TPA and resolve issues with them could
be significant

This is the recommended alternative.
FINANCIAL IMPLICATIONS
The estimated cost of this contract over 10 years is a maximum of $14,000,000.
Annual Budget Status and Source of Funds
The Port paid fees associated with this contract are included in the Port's benefits budget each
year. They are incorporated into the total budgeted amount and then allocated to departments
along with other benefits items such as life insurance premium costs, disability insurance costs,
dental, and vision plan costs.
ATTACHMENTS TO THIS REQUEST
No attachments.

Template revised June 27, 2019 (Diversity in Contracting).