TRANSMITTAL LETTER FOR BOARD MEETING OF JULY 11, 2013
COMMITTEE ON PROCUREMENT
Mr. David St. Pierre, Executive Director
Title
Authorization to amend an agreement for Contract 12-RFP-26 Pharmacy Benefits Management Services with Envision Pharmaceutical Services, Inc. for a three and one half year period from January 1, 2014 to June 30, 2017
Body
Dear Sir:
Authorization is requested to amend an agreement with Envision Pharmaceutical Services, Inc. (Envision) for the period January 1, 2014 through June 30, 2017.
On April 18, 2013, the Board of Commissioners authorized the District to enter into an agreement with Envision (12-RFP-26) to provide pharmacy benefits management services for the District's prescription drug coverage for employees and retirees.
The agreement with Envision included the implementation of an Employer Group Waiver Plan (EGWP) and wrap coverage for the District's Medicare-eligible retiree population. Although the agreement specified that the wrap coverage would be self-insured, it did not specify whether the EGWP (Medicare Part D plan) would be self-insured or fully-insured. Although it is a standard Medicare Part D Plan, it can be funded through either a self-funded or a fully-insured arrangement. The District needs to amend the contract to designate which funding option should be utilized for the EGWP.
The EGWP is a standard Medicare Part D Plan. As such, the plan design and level of coverage for this portion of the pharmacy benefits is established by the Center for Medicare and Medicaid Services (CMS) and not controlled by the District or the selected Pharmacy Benefits Manager. CMS has strict compliance and reporting regulations regarding the administration of these plans. A plan sponsor such as the District has two options for implementing an EGWP: contract directly with CMS by submitting an application to establish its own Prescription Drug Plan (PDP) that meets CMS requirements; or contract with a Pharmacy Benefits Manager that is a third party Medicare Part D sponsor of an EGWP, known as an "800 Series" plan. The actual coverage offered by these products is identical. It is the administrative responsibilities and funding mechanisms that are different.
The best option for implementing the EGWP would be to contract with a Pharmacy Benefits Manager to provide an 800 Series plan. This option shifts the compliance and fiduciary burden of administering the plan to the Pharmacy Benefits Manager. The Pharmacy Benefits Manager would deal directly with CMS to fulfill all regulatory requirements and manage the direct subsidy payments from CMS. This model would utilize a fully-insured funding mechanism. A fully-insured arrangement requires the District to pay a premium based on the projected utilization for the plan.
It is in the best interest of the District to designate the EGWP portion of the coverage as a fully-insured plan. The District does not have the resources to act as its own Prescription Drug Plan sponsor. It is not equipped to provide the level of oversight required to comply with the CMS regulations including the actuarial attestations. The estimated cost for the fully-insured model is approximately 4% or $24,865.00 per year more than with a self-insured plan. The overall cost savings for implementation of a fully-insured EGWP plus a self-insured wrap is estimated to be approximately $597,000.00 per year.
In view of the foregoing, it is recommended that the Director of Procurement and Materials Management be authorized to amend the District agreement with Envision to designate the EGWP portion of the coverage as fully-insured.
Requested, Denice E. Korcal, Director of Human Resources
Recommended, Darlene A. LoCascio, Director of Procurement and Materials Management
Respectfully Submitted, Barbara J. McGowan, Chairman Committee on Procurement
Disposition of this agenda item will be documented in the official Regular Board Meeting Minutes of the Board of Commissioners for July 11, 2013