Large Political Subdivision Fails To Determine Best PPO Discounts


Could this be a gifting of public funds with no basis upon which to determine best value?

A large, 5,000 life political subdivision in Texas recently solicited competitive proposals for PPO access for their self-funded employee benefit plan. Emphasis was placed on determining which PPO network provided the best value. They failed.

Below is a redacted excerpt from the group’s insurance consultant to their board of trustees:

XXX (Name of Group), in this RFP, attempted to get all proposers on the Health Plan Third Party Administration to reprice actual medical claims down to the individual claim level. If successful, XXX would know the discounts being obtained by XXX that can and do vary from vendor to vendor.

However, after much effort and even more time, the net result is that none of the proposers actually repriced the medical claims to the individual claim level. Rather, they either gave an average by zip code, general average or other methodologies that were not verifiable.

In the end, all of the proposer’s numbers were thrown out, as they did not meet the requirements as laid out in the RFP. In absence of verifiable better pricing, we concur with the insurance committee that staying with the known, ABC INSURANCE COMPANY, was the choice that best fits XXX with the least amount of disruption to the employees of XXX.

This illustrates the difficulty in determining which managed care organizations offer the best value. PPO contracts are secretive and proprietary, representing collusionary relationships between medical care givers and third party intermediaries.

In this example, a Texas political subdivision failed to determine which PPO network offers the best value for the taxpayers. Instead, they defaulted to their existing PPO network with no idea of whether they made the right financial decision. Instead they made a “feel good” decision.

Could this be a gifting of public funds with no basis upon which to determine best value?