Two insurance brokerage firms – one that bid slightly higher and one much lower – are asking Statesboro City Council to reconsider after it awarded the city’s employee insurance broker contract to a company requiring a fivefold increase in the monthly fee.

Representatives of ShawHankins, which was awarded the contract, asserted that their company can save the city $1 million on its $2.95 million annual budgeted medical claims for its partially self-insured health care plan. That would dwarf the $52,000 increase in the brokerage fee for the year.

But cost savings were not the reported basis of a city staff committee’s recommendation of ShawHankins. The firms were not asked to predict savings, and the others are questioning ShawHankins’ assertions about savings on medical costs.

“The chosen proposer stated publicly that savings would be significant, even ‘$1 million,’ and then added, ‘Conservatively. There could be more.’ These ‘savings’ are unsubstantiated by data and facts,” Benjamin J. Watkins, principal at Capstone Benefits Consulting LLC, wrote in a Sept. 22 appeal letter emailed to City Manager Randy Wetmore.

Watkins’ letter raised several other objections.

In a briefer email to Wetmore, Brian J. Glenn, president of Glenn, Davis & Associates, wrote, “I feel that the decision was based on misrepresented facts regarding network discounts and other issues.”

ShawHankins, whose nearest office is in Savannah but whose senior benefits consultant, Johnathan Shaw, is a Statesboro resident, asked $5,376 a month to serve as the city of Statesboro’s health insurance broker and provide related services.  Glenn, Davis and Associates, which has been broker for the city’s health coverage since 2008, asked for $1,024 a month. Capstone, which is also based in Statesboro, asked $6,000.

City Council voted 4-0 Sept. 19 to award the brokerage contract to ShawHankins on a recommendation from City Manager Randy Wetmore and staff members who reviewed presentations from the three firms after initially receiving offers from four. Each company made about a two-hour presentation, including answering questions, to the staff committee, Wetmore said.

An RFQ

The committee did not base its recommendation on the asserted savings, Wetmore and Human Resources Director Jeffery Grant said during last week’s council meeting and in an interview Monday. What the city sent out was not a bid request but a request for qualifications, or RFQ. The companies were asked the extent and success of their work with organizations similar to Statesboro, the qualifications and experience of key personnel, and more detailed questions about their technology and legal compliance services.

“We were looking at those services. … How is it that they can take care of our employees? That was the bottom line,” Wetmore said Monday. “Comparing those, ShawHankins seemed to have a broader suite of offerings that they could provide to us. The financial part was part of the presentation, but it wasn’t the determining factor, as I said during the council meeting.”

He noted that ShawHankins has 58 city clients and said 28 of these are comparable to Statesboro in size. A number of its other clients are school systems, including the Bulloch County Schools, and county governments, including Bryan County.

Not insurance

None of these companies would directly insure the city’s approximately 260 covered 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 the stop-loss insurer and a third-party administrator, or TPA, and also negotiates for healthcare provider networks.

“They go out into the market, find the insurers, come back with recommendations of TPAs, recommendations of insurance companies for coverages and make those recommendations to us, and then we’ll select,” Grant explained.

Services ShawHankins offered that were attractive to city staff members include 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, Grant said.

Paperless enrollment, which the city doesn’t have now, will be “a productivity improvement for us, where we’re not having to handle things by hand all the time,” Wetmore said. “We can just enter it once.”

ShawHankins has served as the city’s life and disability insurance broker for three years, but this is done on commission, Grant said. So the quoted monthly cost was really for the health insurance broker services, and Wetmore said another purpose of seeking new offers was to place the three types of insurance under one broker.

Darren Prather, the city’s central services director, did note costs as a concern when he introduced the recommendation to City Council.

“I think we have issues with prescription medications, the cost associated with that on a yearly basis,” he said. “Also medical network charges for procedures and cost percentages in the contracts that we pay for those come at what we consider a fairly high cost for the year. ShawHankins, part of their presentation offered to address our issues.”

Network discounts

A graph suggesting a more than $1 million savings in the city’s annual healthcare claims costs was also included in company’s printed proposal. Johnathan Shaw told the council the costs could be achieved through switching from the local healthcare provider network, Industry Buying Group, for the discounts available through a larger network such as those operated Humana, United Healthcare, Blue Cross or Aetna. These now offer discounts of 50 percent or more, compared to a 30 percent discount the city gets currently, he said.

“The network that you’re on, that is the big driver in the discounts you get on said claims, so while you cannot control the claims themselves, you can control the negotiated discount on those claims,” Shaw said.

City Councilman Travis Chance had said the offer presented the certainty of “500 percent” higher monthly fee, versus uncertain savings on claims.

“The issue that I think is my biggest concern is fixed versus variable,” Chance said. “We do not know what it is going to be long-term.”

He also objected to a contract decision of this size being presented as a recommendation from staff instead of the proposals being presented to the council.

But Chance joined in the 4-0 vote on the motion by Councilman Phil Boyum, seconded by Councilman Jeff Yawn, to grant ShawHankins the contract. Councilman John Riggs was absent.

Mayor Jan Moore commented that ShawHankins “brought their A game” but that she would have liked to have seen projected savings from the other two firms.

Formal appeal

Capstone Benefits Consulting and Glenn, Davis & Associates emailed Wetmore Friday under a city ordinance that allows vendors to appeal an award of a contract within 10 days to the city manager.

“The way that works is, they appeal it to me, I’ve denied the appeal, so that then is appealed to the council,” Wetmore said.

He notified the companies that if they get information to the city by 5 p.m. Thursday, the appeals can be heard at Tuesday’s council meeting.

Herald reporter Al Hackle may be reached at (912) 489-9458.