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INSURANCE CONSULTING CONTRACT SPARKS DEBATE

Sept. 30, 2003 – Not all of the wrangling at the Senate on Monday was about the last-minute arrival of the government insurance contracts or the new costs they entail.
The selection of a consultant by the Health Insurance Board of the Government Employees Service Commission and the board's refusal to provide the request for proposal (RFP) documents submitted to it for that contract consumed much of Monday's discussion.
On Monday night, following the session, Steve Baker of Baker, Magras & Associates said: "What happened today was a mugging of the V.I. government by Cigna and Equicare." He added: "It's not Cigna's fault; they respond to the fees charged by Equicare." Anywhere else in the world, he said, "Equicare would be called a monopoly."
V.I. Equicare is the territory's only Preferred Provider Organization (PPO). Only PPO's can contract with the government for health-care services. Most of the territory's practicing physicians belong to the organization.
Baker said an agreement more equitable to the V.I. government could have been worked out saving the government "millions of dollars."
Sens. Louis Hill asked the board for the RFP documents early in the day. Paul Pacquin, the board counsel, declined, saying that "a safe course is not to release information for that purpose." In the face of more insistence from Sens. Usie Richards and Emmett Hansen II, Pacquin said the information needs to be kept confidential to protect the bidders in future negotiations.
Senate Vice President Lorraine Berry, sitting in temporarily for Senate President David Jones, asked Pacquin to go get the RFP's and other documents during a lunch break. Pacquin did not bring back the documents; he brought Attorney General Iver Stridiron to defend the board's refusal to turn the materials over to the Senate.
Stridiron told Jones the RFP information could not be released because of "proprietary concerns." Because of the "voluminous nature of the documents," the attorney general said, information would have to be "redacted" from them, and "there is not time to redact the statements."
Transparency has its exceptions
"We are well aware of the requirement of transparency in government," Stridiron said, "but even that law has exceptions." He said the issue "isn't that the board wants to withhold the information," but that it would give an unfair advantage to the bidders in future contracts, and could result in lawsuits.
Jones responded that after bids are opened "and one is chosen, that becomes null and void." Stridiron, however, said that people "across the world would be able to look at client lists and fees and get an advantage."
Stridiron provided some bidder "rating sheets" which board members had filled out, but Hill said that "they don't mean anything." Toward the end of the session, Hill again said he wanted "the names of the bidders and how much they asked for their services."
On Tuesday, Hill said: "I expect they will send them to us. I think, essentially, the board and the attorney general agreed to send them to the Legislature."
Baker said he had submitted a bid to the health insurance board volunteering his services for the consultant position without fee as a "community service." He was turned down.
Baker volunteered the services of himself and his wife, Josephine Magras Baker. Baker is a chartered health underwriter, and his wife is a registered health underwriter. They are the only insurance professionals in the territory with those designations, he said.
Hill on Monday repeatedly asked Willoughby Lewis, of V I. Employee Benefits Consultants, the firm the board contracted as its consultant, how the government insurance rates compare to private-sector rates. Lewis said they were "similar."
Baker vehemently disagreed. They are "not similar," he said Monday night. He said his company represents 180 businesses in the Virgin Islands, including at least 15 major employers. "We probably insure half [of the firms] that have 50 or more employees," he said. "Our average client pays about $225 a month for a comprehensive policy, and that works fine for them. The government should have policies for less than that."
Under the rates approved on Monday, the monthly rate for an employee alone, without coverage for dependents, will be $304.16, up from the current $295.14.
According to Baker, "The government with 30,000 employees (including dependents and retirees) should be able to dictate its own terms."
"If we had been selected as consultants, from Day One we would have told Cigna that this is a wide-open bid," he said. "And we would have brought in every carrier possible for insurance quotes — for instance, United Health Care and Canada Life of Puerto Rico, which is a subsidiary of the largest health insurer in Canada."
Baker questioned the board's selecting Lewis as its consultant when Baker had offered his services without charge. Rabsatt said on Monday that V.I. Employee Benefits Consultants was paid between $60,000 and $70,000 for a 90-day contract.
Ten bidders for consultant contract
The rating sheets Rabsatt passed out list 10 bidders for the consultant contract. They show Baker with the lowest score, although not appreciably lower than others. The companies rated are: AND Consulting Inc.; Baker, Magras and Associates; Buck Consulting; Cundy Chapman Scheve; JDJ Associates; Mahoney and Associates; Mercer Human Resource Consultants; PricewaterhouseCoopers; The Segal Co.; and V.I. Employee Benefit Consultants.
The selection criteria include company stability, general experience and record of comparable engagements of size and complexity.
Rabsatt said on Tuesday that the sample RFP she had distributed and the rating sheets should answer questions the senators posed Monday. She declined to comment on Baker's allegations.
Baker is a strong critic of V.I. Equicare. Because it is the only PPO in the Virgin Islands, he says, it is a monopoly and has the power to set medical rates — and, indirectly, insurance rates — for the largest group policy in the territory — covering some 12,000 government workers, their families, and government retirees — a total of about 30,000 persons. That amounts to nearly 30 percent of the territory's population.
Because of the size of the government workforce, Equicare also indirectly influences the rates everyone else pays, he said.
When Monday's session broke for lunch, Berry also asked the insurance representatives to go get Equicare's fee schedule. It, too, was not produced. Cigna representative Jay White told Hill the documents were in "the states" and that he would have to get them from his mainland office.
Cigna based its rates for the territory on those for Washington, D.C., Hill said. He asked White why, for example, they weren't based on those for Puerto Rico, which has one of the country's lowest rates. White said that Cigna had based its rates on information obtained from Blue Shield/Blue Cross, the government's insurers which Cigna took over two years ago.
Ray Barry, chief operating officer for V.I. Equicare, said on Tuesday that "comparing the cost of health care in Puerto Rico, with a population of four million, and the V.I., with a population of 110,000, is no comparison."
High demand without a willingness to pay
It is "extremely critical" for policymakers to educate themselves about the issues involved in health-care costs, Barry said. "There is a high demand, high expectation of great delivery of health care, but we don't want to pay for it," he said. "I wish there was a simple, easy answer."
Barry said he couldn't release the physicians' fee schedule, as it is private information. Howe
ver, he said, Equicare's fee schedule hasn't changed since 1998. "The fees the physicians receive are fair, " he said. "Where insurers may have components where they adjust for inflation, it doesn't apply, because our fee schedule has remained static since 1998. We haven't moved it."
Actually, the schedule was decreased by 5 percent in 2001, at the request of Blue Cross/Blue Shield. Although that decrease was supposed to be for one year, it is still in effect.
Barry also declined to comment on Baker's charges. He said he considers the current consultant, Lewis, who brought in one of his outside consultants, "very effective." Barry said he sat in on some of the consulting meetings, and he believes the insurance board is "well represented for the first time in many years."
Barry also noted that the issue of inflation was not mentioned in Monday's Senate session. "It's a national crisis," he said, "and the V.I. isn't immune from the impact on health care. With the morbidity rates that we have here in the territory and basic inflation, there is a cost for delivering that care."
Since the establishment of Equicare, Barry said, all parties "know up front what the dollar amount is going to be. The patient knows the deductible and the co-payment, and the physician knows up front that it is going to be paid — which can vary widely from insurance company to insurance company."
Lewis said on Tuesday that what Hill was quizzing him about was not the private sector, but the relative value scale of using Washington, D.C., health insurance rates. "I told him I thought other jurisdictions were similar," Lewis said.
Consulting didn't cover seeking other quotes
He said he had not known who the other bidders were until Rabsatt passed out the rating sheets on Monday. He also declined to comment on Baker's remarks but said he had not sought quotes from other insurance companies. "We were consultants to the renewal process for the plan; we were not soliciting new bids," he said
Lewis also said Barry had been mistaken about Lewis bringing in an outside consultant. "We didn't bring in anyone. John Edelman works with us here," he said.
As for the cost of the insurance plan the government selected, "The government program is a very rich program, and they are paying those benefits," Lewis said. Comparing private-sector health plans with public-sector plans would be like comparing apples and cherries, he said. "We offered to change the destination of the plan," he said, "and they said, 'Don't change anything.' We saw avenues that could be used without affecting the pricing."
Lewis said his company spent three or four days putting together its proposal to the insurance board. "We answered questions even when we thought they were redundant," he said. "They ask you for a breakdown for hours you would put in, the charge per hour." He confirmed that his company was paid between $60,000 and $70,000 for the contract.

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