Statesboro City Council's decision to reverse course and stay with Glenn-Davis & Associates as broker for the city's partially self-insured employee health coverage followed a contentious path that began last September with a staff recommendation to switch to another company.
After voting 4-0 on Sept. 19 to award the brokerage contract to ShawHankins, over Glenn-Davis and a third firm, Capstone Benefits Consulting, the council heard their appeals Oct. 3 and voted 3-2 to rescind the contract award. The council was then unanimous in having Councilman Travis Chance and Councilman Jeff Yawn, on opposing sides in the reversal, find an unaffiliated professional to review the proposals.
The city paid Michael Mark, CEO of Care Coordination of America, based in Michigan, $1,600 for the review. His Dec. 14 recommendation left paths open to both of City Council's preferred options. When council met Jan. 2, a motion to award the contract to ShawHankins failed 2-3, and council members voted 3-2 to award the contract to Glenn-Davis, the local firm which has been the city's health insurance broker since 2008.
"Let the record show that the motion passes 3 to 2," Mayor Jonathan McCollar said after the second vote. "I would like to say that we do venture into a gray area when there's a conflict, and with the staff. So, let us pray that we've made the right decision."
The meeting was McCollar's first and began with his swearing-in. But the council spent more time on the insurance broker choice than any other issue.
Not a simple bid
The broker does not actually insure the city's employees and their family members. The city self-insures for claims up to $60,000 and buys a stop-loss policy for cases that exceed that. The broker finds a third-party administrator for the health insurance plan, and the administrator company identifies the stop-loss insurer.
The city staff sent out a request for qualifications, or RFQ, last summer seeking information on brokers' experience, services, technology, compliance resources and references. Four companies responded, and a committee of five city staff members reviewed the responses and invited three firms to make presentations.
The companies' fees were also listed for the council Sept. 19. Capstone asked $6,000 per month. ShawHankins' monthly fee would have been $5,376, indicating a $21 per-head charge for 256 covered city employees. Glenn-Davis & Associates asked for a $4 per-head charge, or just $1,024 per month.
But city staff members said their recommendation of ShawHankins was not based on these "fixed costs" but on services the company could provide. These included paperless open enrollment, an online benefit resource center, and printed enrollment guides and other materials for employees to keep up with their benefits and other technology.
Analyzing healthcare network discounts and reviewing pharmacy benefit management were services ShawHankins offered to help reduce what city officials have referred to as "variable costs," the expense of employees' actual health care.
The RFQ did not ask the brokers to provide savings projections. But ShawHankins did so, and during the Oct. 3 council meeting, ShawHankins' representatives asserted that they could save the city $1 million a year on its $2.95 million budgeted medical claims.
In appeal notices to City Manager Randy Wetmore, a Capstone executive called ShawHankins' savings claims "unsubstantiated by data and facts," and Glenn-Davis & Associates President Brian J. Glenn said he felt the "decision was based on misrepresented facts regarding network discounts and other issues."
In his review, Mark rated ShawHankins' RFQ response best overall and highest on four of six criteria. He rated Glenn-Davis & Associates highest on two criteria. He was not asked to consider the savings claims.
"It is my opinion ShawHankins presented the superior RFQ," Mark stated in his assessment, citing the "quality and attention to detail" of the company's response.
However, Mark made his recommendation of ShawHankins conditional on the city actually being dissatisfied with Glenn-Davis. He stated that "Glenn-Davis and Associates' pricing and being positioned as the incumbent, also puts them in a position of consideration."
During last week's meeting, Chance read another segment of Mark's report.
"If the experience with Glenn-Davis and Associates has been positive with assisting The City of Statesboro with controlling cost, managing and controlling utilization, client servicing, and plan design, they would be the company of choice," Mark stated. "However, if there have been issues in any of the fore mentioned areas, and a dissatisfaction with Glenn-Davis and Associates meeting The City of Statesboro's health and life benefit objectives, it is recommended that ShawHankins be considered as your vendor."
"There's been plenty of opportunity for the city manager, other staff to express dissatisfaction," Chance said. "There has been none. So what are we doing? Why are we making that move?"
But staff members had mentioned concerns during the Oct. 3 discussion. City Human Resources Director Jeffery Grant stated those concerns in more detail Jan. 2.
"One of the things that happens a lot of times, you know, when you have a vendor that's in place, sometimes complacency sets in," Grant said.
After city staff asked the broker last July for strategies to save on pharmacy costs, staff members had to "push" for this through multiple emails and other contacts, he said. The information, received in November two weeks before open enrollment, resulted in about $171,000 savings, he said.
"But those are things that a broker should be bringing to you proactively each year," Grant said. "They should be presenting those type of recommendations to you and not you soliciting for that. You get what you pay for."
In another instance, some "bids were held back" when the city sought a stop-loss carrier, he said. After staff members asked the third-party administrator if there had been other any other bids, there were, and this resulted in the city saving nearly $60,000, Grant said.
But Chance asked why staff members had not expressed these concerns from the beginning. Chance had taken part in the 4-0 Sept. 19 vote to award the contract to ShawHankins. Councilman John Riggs was the one absent then.
"My biggest issue with this whole process is this whole cloak-and-dagger B.S., because none of this was actually presented in the very first meeting that has essentially snowballed to get us to where we are," Chance said during last week's meeting. "If these truly were the issues, why were they not brought up then?"
But Councilman Phil Boyum said that staff members probably hadn't wanted to "air their dirty laundry" about a good corporate citizen that provides the city service.
"I think it wasn't so much that they were trying to hide anything from anybody, but were just trying to be respectful of the individuals that were involved, and making this kind of decision is tough," Boyum said.
But he also said there came a time "to rip the Band-Aid off."
Chance asserted that council's original decision to switch to ShawHankins was "more than 50 percent" based "on a number which was not accurate," referring to the $1 million savings assertion.
"The more this discussion goes on, the more this doesn't smell right," he said.
Meanwhile, the new mayor suggested tabling the vote. When McCollar said, "This is just entirely too flawed to make a decision on," Boyum asked what that meant.
"It means there's too many discrepancies," McCollar said. "We can save a million dollars; we can't save a million dollars. We've got an issue with the performance; we don't have an issue with the performance. It's just too much. It's flawed. There's too many uncertainties."
"I don't see it that way, with all due respect," Yawn said, "and I didn't make my decision 50 percent, but it was 100 percent based not on the million dollars but on the staff's very adamant, diligent work put forth on this RFQ. ... There were five of them, who felt very strongly that this needed to be done."
Yawn made the motion to contract with ShawHankins and Boyum seconded, but the other three council members voted "no."
Then Councilman Sam Lee Jones, who said that the much lower fixed cost was the important thing to him, made the motion to choose Glenn-Davis. Chance seconded it, and John Riggs cast the third "yes" vote, with Boyum and Yawn opposed.
In fact, ShawHankins has served as the city's life and disability insurance broker for three years, but this is done on commission, not reflected in the quoted fees. The council's vote also awarded this part of the business to Glenn-Davis.
A further story will address how Glenn-Davis & Associates will continue working with the city.
Herald reporter Al Hackle may be reached at (912) 489-9458.