Exhibit 1 - Agenda Information SheetCity of Denton
______________________________________________________________________________
AGENDA INFORMATION SHEET
DEPARTMENT: Procurement
CFO: Cassey Ogden
DATE: November 15, 2022
SUBJECT
Consider adoption of an ordinance of the City of Denton, a Texas home-rule municipal corporation,
authorizing the City Manager to execute a contract with United Healthcare Services, Inc., to provide
Administrative Services Only (ASO) for Medical and Prescription Services for the City of Denton’s self-
funded health plans; providing for the expenditure of funds therefor; and providing an effective date of
January 1, 2023 (RFP 7978 –awarded to United Healthcare Services, Inc., for three (3) years, with the
option for two (2) additional one (1) year extensions, in the total five (5) year not-to-exceed amount of
$4,300,000.00).
INFORMATION/BACKGROUND
The City of Denton has a self-funded health plan. This means the City is responsible for funding medical
and prescription claims rather than a fully-insured option where plan cost is paid through premiums to an
insurance carrier. Being self-funded, the City has control of designing its benefits plans and premiums
and, it also helps to control costs and understand healthcare spending.
To administer the self-funded health plan, the City contracts with a vendor for third-party administrator
(TPA) services. United Healthcare has been providing TPA services for the City of Denton’s self-funded
health plan since January 1, 2009. These administrative services include processing all medical and
pharmacy claims, provision of the medical networks and pharmacy facility networks, disease and case
management services, reporting and data management, Centers of Excellence, formulary drug management,
health plan compliance, stop loss coverage, and other services necessary to help manage the overall self-
funded health plan. The current contract expires at the end of 2022, thus necessitating the Request for
Proposal (RFP) process.
The City submitted RFP #7978 to the market and received five (5) responses from carriers:
• Aetna
• BlueCross BlueShield of Texas (BCBS)
• Cigna
• Healthcare Highway
• United Healthcare
The five (5) proposals were reviewed and scored by an evaluation team that included representatives from
the City Manager’s office, the City’s Employee Insurance Committee (EIC), and staff members from
Human Resources.
City Hall
215 E. McKinney
Street
Denton, Texas
www.cityofdenton.co
m
As part of the evaluation process, the bidders were requested to complete a detailed “re-pricing exercise”
related to paid health and pharmacy claims. The re-pricing exercise is a key factor in evaluating the overall
cost of services. The monthly per employee per month (PEPM) administrative fee accounts for
approximately 3% of the total cost of the health plan, so the vast majority of costs come from medical and
pharmacy claims. Because of this, the level of contracted discounts with the medical providers, the provider
network, and the pharmacy rebates must be tested. In order to test this, each provider was asked to “re-
price” the actual medical and pharmacy claims that the City paid between April 2021 through March 2022,
to determine what the City would have paid had each company’s current discount structure and provider
network been in place at that time.
United Healthcare had the lowest projected total claim cost for medical and prescription drugs, based on
the repricing exercise. Additionally, United Healthcare is the incumbent carrier, so there will be no
disruption to our employees, retirees, and dependents. United Healthcare also was competitive in its
employee wellness programs, resources and tools, customer service metrics, claims processing, disease, and
case management services, reporting and data management, Centers of Excellence offerings, network
access, health plan compliance, and formulary drug management. Finally, United Healthcare has been a
good partner for the City since 2009 in helping manage the City’s self-funded health plan.
The evaluation team ranked United Healthcare as the proposal that provided the best overall value for the
City, employees, and retirees. The main differentiator between United Healthcare and the other bidders was
the total cost and lack of disruption in network match and services.
Project Description
Estimated 5-Year
Administrative Fee Expenditure***
Year 1 $ 690,000
Year 2* (1,488 plus 10% = 1,637 count) $ 759,000
Year 3* $ 835,000
Year 4** $ 945,000
Year 5** $1,071,000
Total $4,300,000
*10% employee/retiree increase each year, starting with 2024 average count
**10% employee/retiree increase each year for years 4 and 5, and a 3% rate increase
***Admin fees rounded up to the nearest $1,000
Request for Proposals was sent to 95 prospective suppliers, including two (2) Denton firms. In addition,
specifications were placed on the Procurement website for prospective suppliers to download and advertised
in the local newspaper. Five (5) proposals were received, references were checked, and proposals were
evaluated based upon published criteria including price, compliance with specifications, and probable
performance. Best and Final Offers (BAFO) were requested from the top firm. Based upon this evaluation,
United Healthcare Services, Inc. was ranked the highest and determined to be the best value for the City.
NIGP Code Used for Solicitation: 953 - (Service Only) - Insurance and
Insurance Services, (All Types)
Notifications sent for Solicitation sent in IonWave: 95
Number of Suppliers that viewed Solicitation in IonWave: 13
HUB-Historically Underutilized Business Invitations sent out: 6
SBE-Small Business Enterprise Invitations sent out: 21
Responses from Solicitation: 5
RECOMMENDATION
Award a contract with United Healthcare Services, Inc., to provide Administrative Services Only (ASO)
for Medical and Prescription Services for the City of Denton’s self-funded health plans, in a three (3) year,
with the option for two (2) additional one (1) year extensions, in the total five (5) year not-to-exceed amount
of $4,300,000.
PRINCIPAL PLACE OF BUSINESS
United Healthcare Services, Inc.
Minnetonka, MN
ESTIMATED SCHEDULE OF PROJECT
Services under this contract will begin on January 1, 2023, and will expire on December 31, 2027.
FISCAL INFORMATION
The costs associated with the administration of the ASO for medical and prescription services are funded
by the Health Insurance Fund.
EXHIBITS
Exhibit 1: Agenda Information Sheet
Exhibit 2: Pricing Evaluation
Exhibit 3: Presentation
Exhibit 4: Ordinance and Contract
Respectfully submitted:
Lori Hewell, 940-349-7100
Purchasing Manager
For information concerning this acquisition, contact: Linda Kile, 940-349-8388.
Legal point of contact: Marcella Lunn at 940-349-8333.