Board of Directors Regular Meeting Agenda


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Meeting Date: 03/23/2016  

SUBJECT MATTER:
Receive, consider and act upon a Request for Qualifications for Consulting and Insurance Brokerage Services for Employee Health and Welfare Benefits; (C-2016-0036)
FISCAL IMPACT:
Significant based on annual cost of employee benefits
BACKGROUND:
The Woodlands Township solicited Requests for Qualifications (RFQ) from area employee benefits consulting firms to provide comprehensive employee benefits consulting and insurance brokerage services to support its Human Resources department.  The selected firm will review insurance vendors and negotiate premiums at least annually, provide a recommended course of action and cost estimate for providing competitive and cost effect insurance to employees, provide assistance in plan design and management and coordination of all plan operational issues.  The firm will also provide benefits administration, guidance and support to the Human Resources Department and employees, and ensure the Township is in compliance with the Patient Protection and Affordable Care Act and all legal requirements in the area of employee benefits. 
 
The RFQ was advertised on the Township website.  The deadline for submitting an RFQ was February 26, 2016 at 2:00 pm and four (4) firms submitted proposals.  The Request for Qualifications, copies of the two qualified proposals and the evaluation committee scoresheet are attached for your review.
 
Proposals were received from four firms: Crystal & Company, Gallagher Benefit Services, Highlander Financial Services and McGriff, Seibel and Williams.  The committee which reviewed the proposals consisted of:
 
            Susan Welbes, Director of Human Resources
            Monique Sharp, Assistant General Manager for Finance & Administration
            Karen Dempsey, Assistant to the President
            Doug Adams, Battalion Chief
            Kim McKenna, Property Compliance Manager
            Lori Dunn, Benefits Coordinator
 
A detailed Scope of Services was provided in the RFQ and firms were asked to describe their qualifications and experience, and to answer additional questions provided in the RFQ.  Each firm was rated by the committee on the following criteria with the following weights: 
 
  • Experience in the areas of consulting services and demonstrated knowledge of employee benefits – 30%
  • Previous history with public sector, special districts, multi-site locations – 10%
  • Familiarity with The Woodlands/The Woodlands Township – 10%
  • References – 10%
  • Pricing scale of services – 40%
 
Two of the firms failed to provide pricing for additional services which are currently provided to the Township – GASB 45 preparation, benefits information and enrollment websites, and PPACA administration and compliance.  The RFQ specifically requested that respondents provide detailed, fixed pricing for all services requested.  For this reason, Crystal and Company and McGriff, Seibel & Williams are not recommended for further consideration due to non-compliance with the requirements listed in the RFQ.
 
Highlander Financial Services proposed total annual costs of $105,000 for consulting and brokerage services and all additional services.  Several references provided by Highlander were actually for Neal Welch, who joined Highlander in 2016.  Spring Branch ISD, a Highlander client, stated that Highlander did not provide any services for their medical insurance plan as it was provided through the Teacher Retirement System.  Highlander did not provide responses to several items in the Scope of Services section of the RFQ.  Members of the committee felt that Highlander’s responses were not specific and they provided limited cost reduction solutions.  The committee also had concerns that Highlander would be able to market, negotiate and administer a medical insurance plan as these services were not mentioned in the scope of services or by references.  Even though Highlander’s annual fees are lower than those of Gallagher Benefits, the committee does not recommend an engagement. 
 
Gallagher Benefits Services proposed total annual costs of $130,000 for consulting and brokerage services and all additional services requested.  Gallagher received the highest overall scores using the established criteria.  Staff believes Gallagher has shown they have the experience needed to provide cost effective, quality benefits through aggressive negotiations with vendors.  Gallagher has served as the benefits consultant for the former Community Associations since 2003 and has served the Township since 2009.  Key cost containment measures achieved are:
 
  • The Township has realized an average 5% increase in health care costs since 2013, while the national trend for this same period ranged from 7 - 10%.  In 2015, medical insurance costs did not increase for either the Township or employees over 2014 costs.
  • In 2012, The Township dental plan became self-funded and dental premiums have remained flat since 2012.
  • Gallagher Benefit Services marketed non-medical benefits (life, short and long-term disability) in 2014 and negotiated a 30% rate reduction as well as a rate guarantee for three years.
  • In 2015, the Township’s stop loss insurance was marketed and through aggressive negotiations and a change in carrier, these rates were reduced by 21%.
 
Employee benefit consulting firms, including the firms who submitted proposals to the Township, are typically paid commissions by the insurance vendors. Per the proposed agreement The Township and Gallagher would enter into an agreement which defines the annual cost of contracted third-party health services. If commissions paid by the third-party vendor are greater than the agreed upon cost, a refund is made to The Township.  However, if commissions do not achieve the agreed upon cost, The Township is not obligated to pay the difference.  Additionally, Gallagher has offered to put 10% of their annual fee at risk based solely on The Woodlands Township’s opinion of their performance.  Gallagher has also extended an option for two additional years of consulting and brokerage services for 2020 and 2021, if desired.
RECOMMENDATION:
Approve the committee’s recommendation of Gallagher Benefits Services for consulting and brokerage services for employee health and welfare benefits for three years commencing May 1, 2016 and continuing until May 1, 2019, and authorize the President/General Manager to negotiate and execute the consulting services agreement.
Attachments
Request for Qualifications
RFQ Matrix


    

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