THE MISSISSIPPI LEGISLATURE

The Joint Committee on

Performance Evaluation and Expenditure Review

Report # 537

A Review of the Process Used by the Health Insurance Management Board in 2009 to Procure Insurance Coverage for Mississippi’s Children’s Health Insurance Program

Executive Summary

Introduction

Created in 1997 by Congress, the Children’s Health Insurance Program (CHIP) is a joint federal/state program, with funds for the program being appropriated by Congress as well as by each state’s legislature. The purpose of CHIP was to expand health insurance coverage to children in families whose income is modest but too great to qualify for traditional Medicaid.

Responsibility for administration of Mississippi’s CHIP is divided between the Division of Medicaid and the State and School Employees Health Insurance Management Board (hereafter referred to as “the board” or HIMB), with administrative support provided by the Department of Finance and Administration’s Office of Insurance.

In early 2009, the board began a process to procure insurance coverage for CHIP upon expiration of its policy. The board requested proposals for either fully insured or self-insured coverage.1 The board received proposals from Blue Cross, UnitedHealthcare by AmeriChoice (hereafter referred to as United), and AmeriHealth Mercy (hereafter referred to as AmeriHealth).

Shortly after the board voted on June 24, 2009, to enter into negotiations with United for CHIP insurance coverage for the period January 1, 2010, to December 31, 2013, PEER received a complaint regarding the procurement process utilized by the board.

Specifically, the complainant alleged that:

evaluation committee members’ scoring of presentations and on-site visits did not comply with regulations or the request for proposals (RFP);
pricing considerations and methodology utilized by the board’s consulting firm to analyze proposals did not comply with the RFP;
scoring committee members allowed a proposer to submit additional information after the proposal deadline; and,
through the use of inappropriate criteria, the scoring methodology utilized by scoring committee members favored one proposer over other proposers.

In response to the complainant’s allegations, the PEER Committee conducted a comprehensive review of the process utilized by the State and School Employees Health Insurance Management Board in 2009 to procure insurance coverage for Mississippi’s CHIP. The scope of PEER’s review included only the process used by the board to select an insurer for Mississippi’s CHIP. The scope did not include a review of the performance of UnitedHealthcare once the agreement became effective on January 1, 2010.

Requirements for Procuring Health Insurance Coverage for Mississippi’s CHIP

In procuring health insurance coverage for Mississippi’s CHIP, the Office of Insurance is subject to legal requirements, requirements of the Personal Service Contract Review Board for competitive procurement, best practices for competitive procurement, and requirements of the 2009 request for proposals for CHIP insurance:

legal requirements for procuring CHIP insurance--While state law establishes procedures for the procurement of commodities, personal services, and public construction, no statutory provisions govern the procurement of insurance coverage such as that provided to CHIP-eligible recipients.
Personal Service Contract Review Board requirements for competitive procurement--State law created the Personal Service Contract Review Board to oversee the solicitation and selection of personal and professional services contractual personnel. PSCRB regulations specify certain requirements for requests for proposals for procuring personal or professional service contracts. PSCRB regulations allow the use of competitive sealed proposals for procuring a contract if the agency head determines that the use of competitive sealed bidding is either not practicable or advantageous to the state.

Because the board did not know which option it would exercise for selection of a CHIP insurance provider—non-participating insured or self-insured—the board structured its procurement process based on the PSCRB’s competitive sealed proposals requirements.
best practices for competitive procurement--Because the board’s intent was to select the lowest and best proposal for providing insurance coverage for Mississippi’s CHIP, it was imperative that the board adhere to accepted competitive procurement principles such as those promulgated by the PSCRB and the American Bar Association. Exhibit A below defines the components of a competitive sealed proposal procurement process, based on PSCRB requirements and the American Bar Association’s Model Procurement Code for State and Local Governments.
procurement process described in the request for proposals--DFA’s February 18, 2009, request for proposals for CHIP insurance coverage specified mandatory requirements for proposers and included evaluation criteria on which proposals would be judged. Pages 15 and 16 of the report provide detail on the requirements of the request for proposals, including the specific evaluation criteria and the components of each phase of the evaluation process.

Exhibit A: Components of a Competitive Sealed Proposals Procurement Process, Based on PSCRB Requirements and the ABA Model Procurement Code for State and Local Governments

Component	Description

Request for Proposals	Procuring entity solicits proposals through a Request for Proposals (RFP)

Public Notice	Procuring entity provides adequate public notice of the RFP in a newspaper published in the county or municipality in which the agency is located or in electronic format

Receipt of Proposals	Procuring entity opens proposals so as to avoid disclosure of contents to competing offerors during the process of negotiation. Procuring entity prepares a Register of Proposals and makes the register open for public inspection after contract award. The register indicates the name of all vendors submitting proposals.

Evaluation Factors	The procuring entity’s RFP states the relative importance of price and other evaluation factors.

Discussion with Responsible Offerors and Revisions to Proposals	The procuring entity may conduct discussions with responsible offerors that submit proposals determined to be reasonably eligible of being selected for award for the purpose of clarification to assure full understanding of, and responsiveness to, the solicitation requirements. The procuring entity shall treat offerors in a fair and equal manner with respect to any opportunity for discussion and revision of proposals. Such revisions may be permitted after submissions and prior to award for the purpose of obtaining best and final offers. In conducting discussions, the procuring entity shall not disclose any information derived from proposals submitted by competing offerors.

Award	Procuring entity shall make the award to the responsible offeror whose proposal is determined in writing to be the most advantageous to the state, taking into consideration price and the evaluation factors set forth in the RFP. The procuring entity shall use no other factors or criteria when evaluating proposals. The procuring entity shall send a written notice of award to the successful bidder. In addition, the procuring entity shall make the notice of award available to the public.

Debriefing*	The entity’s procurement officer may provide debriefings that furnish the basis for the source selection decision and contract award.

* PSCRB regulations do not include this component. However, it is included within the American Bar Association’s recommendations for competitive sealed proposals.

SOURCE: PEER analysis of PSCRB regulations and the American Bar Association’s Model Procurement Code for State and Local Governments.

Conclusions

This section states the main conclusion of each of the report’s chapters and summarizes, in question-answer format, PEER’s subconclusions regarding compliance of the State and School Employees Health Insurance Management Board with applicable requirements for procuring health insurance coverage for Mississippi’s CHIP.

Request for Proposals, Public Notice, and Receipt of Proposals

The board complied with PSCRB regulations by developing a formal request for proposals for CHIP insurance coverage, by publicly issuing and advertising the RFP, and by receiving and opening proposals in a manner that maintained the confidential integrity of the proposals.

Did the board procure CHIP insurance coverage through the use of a formal request for proposals?

The board complied with PSCRB regulations by developing a formal request for proposals to solicit proposals from potential proposers.

Did the board notify potential proposers about the 2009 CHIP RFP?

The board complied with PSCRB regulations by publicly advertising the RFP for CHIP insurance and by notifying potential proposers about the RFP.

Did the board receive and open proposals in a manner that maintained the confidential integrity of the proposals?

The Office of Insurance’s staff complied with applicable PSCRB regulations by documenting receipt of proposals from proposers and opening the proposals in the presence of staff.

Evaluation of Proposals and Selection of Proposer

The board did not have a disciplined, equitable process of evaluating proposals and selecting a proposer. At critical points during the process, the board:

lacked evaluative criteria;
treated some proposers differently from others;
had no operationally defined standards for point values awarded to proposers; or,
lacked documentation.

As a result, the board’s process was not fully objective and transparent, thus creating the appearance that the board did not make its award decision objectively.

Did the board’s request for proposals state the areas on which the evaluation committee would evaluate the proposals?

The request for proposals included evaluation areas on which proposals would be evaluated. However, the RFP did not disclose the weighted importance of the six evaluation areas included within Phase Two.

How did the board score the six areas comprising Phase Two of the evaluation process?

On behalf of the board, a five-member committee scored the proposals using weighted scoring for items included within Phase Two of the evaluation process. However, committee members did not consistently adhere to the scoring methodology.

Did the board solicit additional information and documentation from proposers after the proposal deadline date?

The board solicited additional information and documentation from proposers after the March 30 deadline for receiving proposals. The board’s requests included one to United regarding its additional network affiliations; however, the board did not request such from the other two proposers. United’s additional information ultimately resulted in a change in that proposer’s score.

Did the board conduct reference checks on the proposers to determine their ability to provide the services described in the RFP?

The board conducted telephone reference checks on the three proposers and concluded that they could perform as required in the RFP. However, the board did not define what information about a proposer’s previous performance would have eliminated that company from further consideration. Also, the board could not provide documentation that it utilized information available from the Mississippi Department of Insurance for evaluating each proposer’s previous performance.

Did the board allow proposers to make presentations—i. e., conduct technical question-and-answer interviews?

As stated in the RFP, the board allowed the proposers to make presentations to the evaluation committee. However, the board did not establish criteria by which the evaluation committee could award points to proposers for their presentations. Also, the board awarded an additional point to United based on new information provided in that company’s presentation, after the scoring had been completed during the evaluative phase of the selection process.

Did the board allow proposers to submit “best and final” offers during their presentations and, if so, what effect did such offers have on the proposers’ final composite scores?

As allowed by the board, two proposers submitted “best and final” offers at the time of their presentations before the evaluation committee. However, the board had no uniform evaluation process for these “best and final” offers.

Did the board conduct on-site visits with proposers?

The scoring committee conducted on-site visits with United and Blue Cross, but excluded AmeriHealth from such visits, even though the company was considered a finalist at the conclusion of Phase Two and a sufficient number of points were available from the site visit to change the outcome of the award. In addition, without applying any objective criteria, the scoring committee awarded one point to United and deducted four points from Blue Cross.

Notification and Debriefing of Vendors

The board complied with PSCRB regulations by notifying all proposers of its award decision. However, the board did not conduct debriefings with proposers that were not selected to provide insurance coverage, as recommended by the Model Procurement Code for State and Local Governments.

Did the board promptly notify all proposers of its award decision?

The board complied with PSCRB regulations and provisions of the Model Procurement Code by promptly notifying all proposers of its award decision.

Did the board conduct debriefings with proposers that were not selected to provide CHIP insurance coverage to furnish the basis for its award decision?

The board did not conduct debriefings with proposers that were not selected to provide insurance, as recommended by the Model Procurement Code, even though after the board made its award decision one proposer requested information from the Office of Insurance as to the deficiencies of its proposal.

The Effect of the Board’s 2009 CHIP Insurance Procurement Process

PEER found that two of the four complaints about the CHIP procurement process had merit. Also, beyond concerns raised by the complainant, PEER documented weaknesses in the board’s procurement process that the board should address for future procurement efforts. Despite utilizing a process that incorporated some of the components of best practices, the board’s procurement process lacked discipline in some instances and was not fully objective and transparent, thus creating the appearance that the board did not make its award decision objectively.

Recommendations

The Legislature should require the State and School Employees Health Insurance Management Board (or any other agency made responsible for Mississippi’s CHIP) to procure competitively the insurance coverage for the program using a request for proposals, specific criteria for evaluation, and written rationale for selecting a proposer to provide coverage. MISS. CODE ANN. Section 25-15-301 (1972) imposes a similar requirement on the board for administration of the state health plan.
When developing a request for proposals to procure insurance coverage for Mississippi’s CHIP, the board should include the weighted values for areas on which the cost and technical merits of a company’s proposal will be evaluated. Such values should allow companies to develop proposals that are more responsive to the needs of CHIP.
To ensure the integrity of the board’s competitive procurement process for CHIP insurance coverage, the board should require the Office of Insurance’s staff and its consultants to complete the development of all evaluative tools (e. g., scoring grids, cost methodology) prior to the time the board issues its RFP for such insurance coverage.
To document the receipt and opening of proposals, the board should require Office of Insurance staff responsible for such activity to sign their names on the “Register of Proposals.”
To assist scoring committee members in objectively and accurately scoring a proposal, the board should ensure that recommended responses for items in the RFP questionnaire are stated in operationally defined terms consistent with the services being requested of the proposers. Also, the board should ensure that scoring committee members adhere to point values assigned to criteria for items included within the RFP questionnaire. At the conclusion of the scoring process, the board should require Office of Insurance staff to conduct an inter-rater reliability analysis to identify variances among scorers that should be discussed and evaluated further.
If the board chooses to continue using the competitive sealed proposal method of procurement, the board should require the Office of Insurance’s staff to establish a firm date by which proposers may submit a “best and final” offer. Such offers should include revisions of cost proposals, if any, and submission of additional information or changes to the proposer’s initial proposals. The board should not allow evaluation committee members or its consultants to request or accept information from proposers after the established “cut off” date for “best and final” offers.
With regard to reference checks, the board should require the Office of Insurance’s staff to consult with the Mississippi Department of Insurance (and document such consultation) to determine whether the department has information that would reflect on a company’s ability to provide the requested services. In addition, the board should develop criteria by which reference check information will be judged and factored into the overall evaluation process.
The board should review the practice of having evaluation committee members score finalists’ presentations and on-site visits to determine whether this practice ensures that all proposers are treated fairly and objectively. If the board chooses to continue the practice, it should:
- develop an agenda or itinerary to guide committee members through this portion of the evaluation process;
- require the Office of Insurance’s staff to develop criteria by which finalists’ presentations and on-site visits will be scored; and,
- determine an appropriate number of points that may be awarded to finalists for presentations and on-site visits.
Unless the RFP explicitly states that presentations and/or on-site visits will be discretionary on the part of the board or the evaluation committee, the board should require that all proposers considered to be finalists in the evaluation process be afforded an opportunity to make a presentation and receive an on-site visit.
The board should require the Office of Insurance’s staff to conduct debriefings with proposers that were not selected, upon request, after the board has voted to enter into negotiations with a selected proposer. Such debriefings could provide general information regarding the quality of a proposal that was not selected. At the conclusion of negotiations and after the board has signed an agreement with a company to provide CHIP insurance coverage, the Office of Insurance’s staff should be authorized to conduct more comprehensive debriefings with proposers that were not selected, upon request. However, there should be no disclosure of any information derived from proposals submitted by competing proposers.
To ensure that the board can justify and support its selection of a particular company to provide CHIP insurance coverage, the board should require the Office of Insurance’s staff to maintain appropriate work papers to document major decisions and thought processes associated with the development of the request for proposals, development of evaluative tools, and the scoring of proposals, presentations, and on-site visits.

1 As part of the RFP, the board asked proposers to provide proposals on a fully insured (i. e., the purchase of an insurance product with the insurance company bearing financial risks of the plan) or self-insured (i. e., contracting with a third-party administrator with the state bearing financial risks of the plan) basis.

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