RFP Process Under Fire – Insurance Consultant or Insurance Agent, or Both? Who Is KBA?


According to this article, paid claims for the prior year were $35 million and low bidder came in at $27 million. Consultant/insurance agent recommended low bid for a “savings” of $8 million.  Does a rental PPO network out perform the Blue Cross network? Is district’s insurance consultant acting as an insurance agent, fee based consultant, or both? http://esbstaff.lpssonline.com/attachments/3da8b4cd-d8ce-4dbb-aadd-4bda2b6c081c.pdf

Sometimes a second opinion can be important [ City of Lewisville – http://blog.riskmanagers.us/?p=12968, Edgewood ISD – http://blog.riskmanagers.us/?p=14796]

For two years running, the Lafayette Parish School Board’s selection of a group health benefits provider has been tainted with misinformation, fuzzy math and a push to hire a company with a résumé that raises more questions than it answers.

This year, the process has sparked a growing outcry from a group of retired teachers dumbfounded over the board’s failure to shed any sunshine on a process that’s supposed to be public.

At the center of the issues surrounding this year’s selection process — and there are many — is the board’s hiring of a consultant in June to oversee the bid process. That consultant is Rina Tikia of the Tikia Consulting Group out of Metairie.

“[Tikia] presented herself only as a consultant, but we later learned she wasn’t just a consultant, but is actually an independent insurance agent,” says Pat Sonnier, a retired teacher and former assistant superintendent with the LPSS.

Sonnier has close to 40 years of experience in the school system and about 17 years of involvement with the insurance renewal process. In the past, says Sonnier, it was customary for the school board to base its decision on a recommendation from the school system’s insurance committee — a group comprising retired and existing employees, including teachers, representatives from the central office, and the maintenance and cafeteria staffs.

“The board would always vote based on the insurance committee’s recommendation, and there was never a problem in the past,” says Sonnier. “But with this board, particularly several members, that has not been the case.”

She points to last year’s push by LPSB members Hunter Beasley and Tehmi Chassion to award the contract to Southern Benefit Services. In an April cover story in our sister publication ABiz, The IND uncovered the motive, at least as far as Chassion is concerned, in pushing so gung-ho to award the contract to Southern Benefit Services. That story (read it here) revealed a likely ethics violation by Chassion over his failure to disclose the business relationship between his half-brother, City-Parish Councilman Brandon Shelvin, and Southern Benefits’ Wayne Elmore and to recuse himself from the vote because his half-brother stood to potentially benefit financially from the contract.

Despite the push from Beasley and Chassion, the board ultimately decided during last year’s selection process to stick with its long-time administrator, Blue Cross and Blue Shield of Louisiana.

When it came time to get the ball rolling this year, Beasley broke with tradition and took it upon himself to issue the RFP for consultants. In the past, the hiring of a consultant was handled by the insurance committee and the central office. One problem with the way things were handled this year is that unlike in the past, no firm contract has been nailed down with Tikia, meaning the school system is in the dark over what it will owe once all is said and done.

School system records show that Tikia has proposed a flat rate fee of $200,000 for her services — a marked increase when compared to what the school system paid in past years while working with Health Plus Consulting. According to information obtained in a public records request, Health Plus’ contract for 2013 cost the school system only $70,900.

One glaring similarity to last year’s selection process, which hasn’t been lost on Sonnier and her group of fellow retirees, is that it’s the same duo — Beasley (who did not immediately return our call before this story went live) and Chassion (who stopped returning our calls many months ago) — now leading the push to approve a deal with a different administrator.

That administrator is Key Benefit Administrators, and it’s the company being pushed by Tikia, who’s math, according to Sonnier, has raised even further suspicions.

On the top of the list of Tikia’s questionable handlings of the bid process is that unlike last year, when the board had bids from seven companies to consider, this year’s slate of prospects has only two options — KBA and Blue Cross.

“When the insurance committee was given the companies to review, they were only given two,” says Sonnier. “[Tikia] eliminated all the others. Usually the committee is given an entire list, with a binder of facts to verify the numbers they are presented. The committee never received this info. They weren’t even given a binder of facts about those two companies to review. When we asked for those records, which are public, she never gave them.”

During an Aug. 28 meeting with the insurance committee, Sonnier says Tikia even refused to name the non-Blue Cross company, and would only refer to its initials — KBA.

“We actually had to get on the Internet to find out who KBA was,” adds Sonnier.

Also problematic is Tikia’s handling of the RFP, a process that resulted in the near elimination of every bidder except for KBA.

“In the RFP, it said, ‘aggregate not applicable,’” explains Sonnier. “So the companies turning in proposals were under the impression they didn’t need to turn in aggregate computations. But then the consultant says she called and asked them to turn in, which you can’t do. Once a proposal goes out in writing, you can’t add something to it unless you resubmit the RFP and give people more time.”

That snafu resulted in Tikia eliminating three companies — United Healthcare, Gilsbar and Coventry — from the process. Blue Cross was almost included in that field of eliminated companies as well. Blue Cross’s take, according to an email from Greg Cross, the company’s vice president of group marketing:

LPSS’ Request for Proposal did not require an aggregate stop-loss quote. In its cover letter, the school system indicated only that it was interested in specific stop-loss coverage. This is what we provided. The fact that the RFP asked only for a specific stop-loss quote did not raise a red flag. We have serviced the LPSS for 17 years and don’t recall them ever opting for aggregate stop-loss coverage.

After we turned in the RFP, Ms. Tikia called us and said we would need to issue a quote for aggregate stop-loss coverage or we would be disqualified. She said the board would accept our quote as a courtesy. Three other major administrators apparently were not given that same courtesy. Instead, they were disqualified for not submitting an aggregate stop-loss quote.

And then there’s the fuzzy math, which is why the school board, enticed by the lure of major savings, is leaning toward awarding the group benefits contract to KBA. Yet, according to Sonnier and Blue Cross’s group marketing VP, the bid from KBA should be heavily scrutinized — perhaps through an audit by a consulting firm with no stake in the process — before taken as fact. On paper alone, KBA is claiming big-time savings with its submission of a $27 million bid — a savings of $8 million from Blue Cross’s $35 million bid.

According to Blue Cross:

We believe this will ultimately be revised to reflect a more realistic amount of exposure for the LPSS. This is because claims for the LPSS run about $35 million a year. However, stop-loss quotes are not finalized until the reinsurer goes through a disclosure phase, which usually takes place 20 to 35 days before an effective date. When the reinsurer does the disclosure phase, it will find that the claims incurred are actually about $8 million more and the quote will change. Because of this, we are convinced that when all is said and done, the LPSS will actually face a significant increase in the amount they are paying for medical claims.

The only real way to accurately project what the actual claims exposure would be to the LPSS is to have an independent review of the claim-pricing exercise. The [school board] voted at a recent board meeting to have such a review performed but now appears to have abandoned the process in favor of simply attempting to disqualify Blue Cross as a bidder and award the contract to KBA by default.

We use our own statewide provider networks. This means that we have relationships and have personally negotiated with the doctors, hospitals and other medical facilities in our networks. That is why we have some of the deepest discounts available. Key Benefits is renting its network and will not be able to provide the type of discounts we can. This is one reason why, when the stop-loss coverage issue is corrected, costs for LPSS will go way up.

Based in Indiana, KBA, if awarded the contract, will contract its services out to other third-party providers. That, says Sonnier, has drawn considerable concern from her group to get on the phone with area doctors and hospitals to get their thoughts on KBA.

“A lot of doctors we’ve spoken with say they got off the KBA list because they were having such a hard time collecting and because of various other issues,” says Sonnier.

The fact that KBA will be contracting out its services to various third-party providers has also raised questions of which companies that will include, which resurrects concerns over the push last year by Beasley and Chassion to award the contract to Southern Benefit Services.

“There are rumors going around about a connection between KBA and Southern Benefit Services, but when we ask questions we don’t get answers,” explains Sonnier. “KBA has a company that’s incorporated here that they’ll do business through, but we haven’t been able to identify that company. The best thing we can see is for the school board to just start the process over. Considering six other companies were rejected because they didn’t provide an aggregate quote when [Tikia] didn’t call for an aggregate quote in the original RFP, it makes you wonder why they weren’t considered.”

Sonnier says the most logical resolution would be for the school board to extend its contract with Blue Cross for one more year, and hire a national consulting firm with no ties to insurance sales to conduct an audit to determine whether KBA’s claims of $8 million in savings are in fact valid. Ultimately, she argues that the school board needs to do its homework before signing a deal with a company, which as far as the public’s concerned, is questionable at best.

The IND reached out to Tikia, who in a Wednesday morning phone conversation argues the entire process has been handled in the public eye with “total transparency.”

“My role is to be objective, and that’s what I’ve done,” says Tikia. “I was hired as an independent consultant, and I evaluated all the plans and picked KBA for the superior service and savings. When I recommended KBA it provoked a firestorm of protest from Blue Cross. But regardless of the provider selected, [LPSS] will still pay me a fixed fee. All it requires now is signature of approval.”

When asked to verify the dollar amount of that fixed fee, Tikia deferred, saying it was a “moot point.” She also disputes the claims by Sonnier and Blue Cross that the original RFP only called for stop-loss coverage, saying that is not accurate and that we should contact LPSS Risk Management Director Mona Bernard for verification. We spoke with the LPSS Risk Management Director, but unlike Tikia’s claim, the original RFP, says Bernard, listed the aggregate quote as “not applicable.”


Bernard says Blue Cross is not alone in protesting Tikia’s handling of the RFP process. “Blue Cross wasn’t the only one —  we got a letter this morning from Coventry complaining that they were disqualified because they didn’t provide the aggregate,” says Bernard.

In the letter, Eugenie Guillot of Coventry writes:

We are at a loss as to why we were eliminated especially since the RFP we received specifically stated Aggregate coverage was not requested. We are also very concerned about being eliminated for not quoting aggregate stop loss when we were instructed by the broker [Tikia] to not quote aggregate stop loss.

According to Bernard, the only connection between KBA and Southern Benefits, that she’s found, is that both companies subscribe to the PPO Plus Network.

“Companies like KBA, they rent a network, and pay a fee for their people to access that network, whereas a company like Blue Cross, they do their own provider contracting,” explains Bernard. “As far as the rumors of KBA subcontracting Southern Benefits, I just think that’s people speculating and trying to make more of a connection than there may be. I think what’s raised the biggest red flags for a lot of members on the insurance committee is that last year, the bid from Southern Benefits was considerably more expensive using the same PPO Plus network that KBA uses, and the PPO Plus discounts were so much less than what Blue Cross was offering. But then suddenly this year, we’re being told the opposite. The thing is, we’re still waiting to see the evidence to back it up.”

Following its Oct. 2 vote awarding the contract to KBA — supported by board members Chassion, Beasley, Mark Cockerham, Kermit Bouillion and Rae Trahan — which was later deemed improper, the board is expected to make a final decision during Wednesday’s meeting.

Who is Key Benefits?  http://www.acadianabusiness.com/business/news/indreporter/15478-who-is-key-benefit-services