Councilman Charles Morgan and Business Administrator Robert Hary share the same view toward hiring a broker to help the township evaluate its healthcare plans, benefits and expenditures: no way, no how. But Hary and Morgan differ apparently on how a consultant is defined.
After tweaking contract terms at the October 24 meeting, West Windsor Council voted in favor of hiring a healthcare consultant — being clear that it will not allow any resemblance to a broker’s reimbursement. Eric B. Labaska of a New York firm, Frenkel Benefits, will receive a one-year professional services contract for $45,000, reduced from the previously reported amount of $50,000. The contract affords the township an option for another two years at the same amount as well as a 30-day out clause, with or without cause. Hary said that by contrast brokers usually receive a percentage of the accountholder’s premium, typically 3 percent. West Windsor’s premium is roughly $3.5 million so a broker would collect over $100,000.
As Councilwoman Linda Geevers had indicated at the October 11 meeting, Morgan would have a strong opinion on the choice for healthcare consultant. When the township put out its request for qualifications (RFQ) only two firms responded and picked up West Windsor’s information. Morgan, unaware of the limited selection among consulting firms, berated the choice, saying that Frenkel is designated as a platinum broker by United Healthcare and is also on the strategic advisory boards of every major insurance company.
“They are a distribution channel for the sale of insurance, and that means they will get soft dollars and commissions on the sale of coverage,” Morgan said. In a subsequent E-mail Morgan added that he was unhappy with the flow of information from the administration. “This is another example of the administration placing Council in a position of having to approve something that is sub-optimal in quality whereas inclusion of us from inception could have led to a quality result (and a much shorter meeting).”
Hary said all such consulting firms “are in the business of being brokers as well” but that the township was very clear in its RFQ and during the interview process that they wanted a consultant and not a broker, “someone we can evaluate on a year-to-year basis because they are working for us and not getting any third-party dollars. They are not authorized or permitted to take any money from the insurance carrier,” Hary said.
Hary said the administration expects Labaska to shop out the current insurance policy to other carriers and offer expertise on the relationship of their deductible and other increases or decreases to the premium, offering West Windsor insight for contract negotiations with its employees. Other responsibilities will include working on West Windsor’s Medicare part D application; Early Retiree Reinsurance Program (ERRP) for the federal government; and reviews of employee benefits, contracts claims history, and actuary services.
Morgan, who has nearly 40 years experience working as an attorney in the insurance industry, cited information from the Frenkel firm’s website and from its proposal as the basis of his concern.
“They claim that actuaries will be on our team, and you’ve heard me speak about the importance of actuaries before. Yet Frenkel’s only person with a remote semblance of an actuarial claim is Adam Okun, who is ‘working on completing his pursuit of the associate of the Society of Actuaries designation’ — he ain’t an actuary! You’re either an associate or a fellow. Yet they say the team of professionals represents over 100 years of consulting and actuarial experience — so where are the actuaries?” Morgan asked.
In defense of the selection, Hary said that Frenkel is a large company with qualified individuals to handle the scope of actuarial services needed by the township, which include the actuary table required to link what liabilities the township will have for healthcare going forward.
Frenkel has also worked with West Windsor before, handling the township’s Medicare part D program in 2010, which Hary says resulted in “us getting some money that we wouldn’t have normally got.” Eric Labaska is familiar to Hary as well. He used to work for the “huge” firm of Brown and Brown in Philadelphia and handle several public sector clients. Morgan would have recommended the Philadelphia consulting firm of Milliman Inc.
Looking into Frenkel’s client packet, Morgan wanted to make sure the language in the professional services contract held them to their claim. He insisted that there should have been a 10 percent fee reduction included in the professional services agreement if the firm failed to meet the township’s expectations. Hary later referred the Council to his one-page outline of services that was included in the contract. He felt that establishing numeric expectations of what the consultant should be able to save the township was very difficult and therefore purposely not included in the contract.
“We need to evaluate what we are providing already and what we can provide better. I don’t want to tell him to reduce our costs by 6.2 percent because he might be able to get 8 percent,” Hary said.
Resident John Church directed a question regarding the consultant’s hourly rate to the council, as he noted that all other municipal consultants had their hourly rates noted for the public. Councilwoman Linda Geevers compared the contract to the township’s engineering bids, which always include hourly rates, and she suggested that the township could be overpaying if the firm works only 20 hours for its $45,000 sum. Hary quickly refuted that notion, saying Frenkel would not meet expectations that way, and he explained that an hourly rate had not been negotiated.
“This is strictly an annual contract and we will be evaluating this individual based on real results, not the hours that they work,” he said.
Legal counsel Karen Cayci amended the contract to reflect Morgan’s point, confirmed by Hary, that Frenkel will not receive any form of commission, any overages, or — in Morgan’s words — “other form of remuneration associated with the placement of business with us.”
After nearly an hour of discussions the Council voted, and Morgan said he “begrudgingly” voted to accept the proposed one-year agreement on the condition that new conditions were accepted by Frenkel.
Hary said he had been trying to bring the motion before the council for nearly two years as the changing landscape of healthcare costs and benefits prompted the administration to seek answers from an independent, unbiased source. The proposal was delayed due to Council’s long-lasting struggle with InterCap, its lawsuits, and the ordinances, which were finally voted for on September 19. Hary then introduced the idea of a healthcare consultant to the Council at its first meeting after InterCap, October 11, but Councilman Morgan was away. Although Hary sent a memo to all the Council members Morgan did not bring up his concerns to Hary prior to the October 24 Council meeting.
In early November the premium costs for the next year are released, and Hary wants to have the consultant in place as soon as possible for him to work with the township to evaluate its options.
Editor’s note: Following the publication of this article, the News heard from Adam Okun of the Frenkel staff, who said he is “in fact an associate of the Society of Actuaries (ASA) and member of the American Academy of Actuaries (MAAA). Mr. Morgan was obviously unaware of this at the time he made his comments.”
Morgan noted that his comments relied on the description of Okun’s status included in the RFQ submitted by the Frenkel firm and added “this is not about the qualifications about Mr. Okun as much as it is a question of the qualifications of Frenkel as an independent consultant (which it is not) rather than a broker (which it most certainly is).”
