LAFAYETTE — Lafayette city-parish government is privatizing the administration of health insurance for its roughly 2,200 employees in a move that could save an estimated $11 million over the next three years.
The Lafayette City-Parish Council on Tuesday voted unanimously to authorize City-Parish President Joey Durel to negotiate a contract with Blue Cross and Blue Shield of Louisiana to manage Lafayette’s self-funded employee insurance program.
The company was one of eight to submit proposals for the contract.
City-parish officials considered only Blue Cross and Blue Shield as a finalist because an assessment formula ranked the company’s proposal so high that it was “impossible for any of the other proposers to overcome this point difference,” City-Parish Risk and Insurance Manager Tommy Teague wrote in a memo to council members.
The contract, which will begin Nov. 1, could save city-parish government an estimated $11 million over three years, Teague said.
City-Parish Chief Administrative Officer Dee Stanley said that figure is based on past claims, and the precise savings is not known because it depends largely on the frequency and severity of employee health claims in the years to come.
Stanley said the contract is expected to stabilize employee health insurance premiums, which would have risen had city-parish government continued to administer the program on its own.
“We do not anticipate the premiums will increase,” he said.
Stanley said the savings are realized not so much in administrative costs but in the big discounts that a large insurer such as Blue Cross and Blue Shield can negotiate with medical service providers.
“You have to look at the whole package,” he said.
Other proposals for managing city-parish government’s health insurance program were received from Coventry, Gilsbar, Humana, Meritain, Southern Benefit Services, United Healthcare and Web TPA.
It is unknown how those companies’ proposals stacked up against Blue Cross and Blue Shield because the ranking used to evaluate the proposals were coded as not to reveal the estimated savings, which could be considered competitively sensitive information.
But Blue Cross and Blue Shield’s estimated savings of about $3.7 million a year was about $1.7 million a year above the savings estimated by the next closest proposal, according to a coded ranking list submitted to the council.
City-parish government is not guaranteed any amount of savings under the proposal, but Blue Cross and Blue Shield has agreed to a penalty of up to $400,000 if the company cannot deliver on the medical provider discount rates laid out in its proposal, Stanley said.
The council approved the measure without much discussion.
The contract is for three years, with an option for renewal, Teague said.