Astute Purchasing Agent Nails It

A long time friend who has spent almost all of his working life in the pubic purchasing arena in Texas has a perspective that many of us in the insurance community have failed to acknowledge. 

By Bill Rusteberg

Working for political subdivisions in purchasing throughout his working years, Adrian was tasked with managing and supervising the competitive purchase of group health insurance. It was my pleasure to assist him as an outside consultant from time to time over the years.

“Bill, it’s that time of year again. We must go to bid for health insurance and I need your help!” would be the summons.

On the last assignment we worked together, while we were analyzing proposals received, he turned to me and said something profound that I had never heard before from anyone in our industry.

“Bill, I don’t know why we are wasting our time on this. Every time we seek competitive bids for health insurance, the cost always ends up being the same no matter who is awarded the contract. For example, our annual cost last year  was $17 million. Even if we change this year and go with the “low bid” our cost next year will be $17 million. And the cost goes up 5-10%  or more every single year like clockwork. Just look at our past 10 year history………….it’s true!……………The whole idea of going to bid to save taxpayer money doesn’t apply to health insurance.”

He’s right of course. When Texas political subdivisions go to bid for health insurance they simply slap together last year’s RFP specifications including the request “match or exceed our current benefit plan” along with the staus quo ritual of a PPO re-pricing exercise (a fraud perpetuated by status quo consultants) in order to determine which network has the best pricing. (See  The PPO Claim Re-Pricing Charade Smoke & Mirrors – Comparing PPO “Discounts”)

The fact of the matter is no matter which vendor gets the nod, all managed care contracts guarantee cost increases year after year.

Changing a logo on your health insurance card does not save money.


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