This is What You Thought You Bought, This is What You Bought, and This is What You are Paying For…..


The costs associated with administering a self-funded employee medical program can be confusing to many. There are  many “moving parts”, some of which are inter-dependent while some are not. Some of the “parts” are much like a vermiform appendix, completely useless. Each part is assigned a cost factor, much like an automobile engine. The water pump costs $250, fan belt is $34, spark plugs are $3 each, ect.

In a Request for Proposal for a self-funded group medical plan, consultants usually ask vendors to indicate costs on each line item of their proposal. For example, how much is the cost of claim administration, PPO access fee, stop loss insurance, broker commissions, utilization review fees, etc. An Excel spreadsheet is utilized to compare line item costs by vendor and this is usually provided as part of the consultant’s recommendation and upon which a decision to purchase is made.

However, somewhere and somehow during the RFP process, a process that is “fluid” in some instances, interpretations and understanding of proposals submitted can be misinterpreted or misrepresented utilizing the all-famous method of comparing various vendors – the dreaded Excel Spreadsheet.

A careful post review of an awarded contract would entail three considerations; What did the Plan Sponsor (employer)  think they were awarding, 2). What was awarded and 3). What will the Plan Sponsor actually pay contractually?

So, if the water pump costs $250, and the fan belt is $34, as shown on the consultant’s Excel Spreadsheet, why would the contract show: “For providing a water pump and a fan belt, the total all inclusive cost is $300”? Would it not be a prudent business practice to question why the “all inclusive”cost is $16 higher than the cost shown on the consultant’s Excell spreadsheet? Would you sign this contract? A 7,400 life Texas public school district just did.

Editor’s Note: We will post an actual real life example of a recent award of a $40 million self-funded health contract with documentation obtained under the Texas Open Records Act. We will leave it up to the reader as to conclusions to be drawn.

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