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Exhibit 1 - Agenda Information SheetCity of Denton _____________________________________________________________________________________ AGENDA INFORMATION SHEET DEPARTMENT: Procurement ACM: Cassey Ogden DATE: September 17, 2024 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 Medical Network, Claims Administrative Services, and Pharmacy Benefit Management 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, 2025 (RFP 8577 – 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 $4,787,000.00). STRATEGIC ALIGNMENT This action supports Key Focus Area: Pursue Organizational Excellence and Collaborative and Respectful Leadership. INFORMATION/BACKGROUND The City of Denton has a self-funded health plan meaning the City is responsible for funding medical and prescription claims rather than a fully insured option. Being self-funded, the City has control of designing its benefits plans and employee contribution structure and implements programs to control costs and promote employee wellbeing. To administer the self-funded health plan, the City contracts with a vendor to administer a provider network, pay covered claims, and secure the most fiscally responsible prescription pricing. United Healthcare has been providing these services for the City of Denton’s self-funded health plan since January 1, 2009. While the current contract will not expire until December 30, 2027, the City decided to conduct an RFP to secure additional pharmacy savings and improved contract terms. The City submitted RFP #8577 to the market and received six (6) responses from: • Aetna Inc. • BlueCross BlueShield of Texas (BCBS) • Cigna • Marpai Health • SlateRx LLC • United Healthcare City Hall 215 E. McKinney Street Denton, Texas www.cityofdenton.com The six (6) proposals were reviewed and scored by an evaluation team that included representatives from the City Manager’s office, Accounting, Human Resources, and the City’s broker of record. 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. To test this, each provider was asked to “re-price” the actual medical and pharmacy claims that the City paid between May 2021 through April 2024, 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, saving the City an estimated $3.4M in pharmacy spend over the next 3 years while also adding the ability to do a market check of pharmacy pricing every 18 months. 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. *10% employee/retiree increase each year, starting with 2026 average count ***Admin fees rounded up to the nearest $1,000 Request for Proposals was sent to 152 prospective suppliers, including three (3) Denton firms. In addition, specifications were placed on the Procurement website for prospective suppliers to download and advertised in the local newspaper. Seven (7) proposals were received, with six (6) meeting specifications. 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: 152 Number of Suppliers that viewed Solicitation in IonWave: 12 HUB-Historically Underutilized Business Invitations sent out: 17 SBE-Small Business Enterprise Invitations sent out: 33 Responses from Solicitation: 7 Project Description Estimated 5-Year Administrative Fee Expenditure*** Year 1 $730,000 Year 2* (1,684 plus 10% = 1,852 count) 827,000 Year 3* 946,000 Year 4* 1,072,000 Year 5* 1,212,000 Total $4,787,000 RECOMMENDATION Award a contract with United Healthcare Services, Inc., to provide Medical Network, Claims Administrative Services, and Pharmacy Benefit Management 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 $4,787,000. PRINCIPAL PLACE OF BUSINESS United Healthcare Services, Inc. Minnetonka, MN ESTIMATED SCHEDULE OF PROJECT Services under this contract will begin on January 1, 2025, and will expire on December 31, 2029. 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: Ordinance and Contract Respectfully submitted: Lori Hewell, 940-349-7100 Purchasing Manager For information concerning this acquisition, contact: Misty Hambright, 940-349-8573. Legal point of contact: Marcella Lunn at 940-349-8333.