A story NAnewsweb.com posted Feb. 28th about the Union County board contracting for group health insurance has brought many comments and questions.
The following additional information may help clarify what happened.
For more than 15 years, the Union County Board of Supervisors bought group health insurance for county employees from the Morgan White Group of Jackson and Oxford. The county board did not seek price quotations for employee health coverage during those years, nor was it required to do so by state law. As it has routinely done for many years, Morgan White Group tendered a group health insurance renewal notice to the Union County Board of Supervisors in January, 2017.
Morgan White Original Quote, January 2017
The January renewal quotation by Morgan White called for an eleven percent (11%) increase in the cost of county employee health insurance for the coming year, starting April 1, 2017. In its original quote, Morgan White recommended that the county continue its primary health insurance with Humana Health Insurance and its “gap” insurance with Morgan White’s own AmFirst Insurance Company, the same insurers the county contracted with last year.
“Gap” insurance is a supplemental policy intended to cover the cost of some deductibles and co-pays in the coverage of a primary insurer.
Total premium cost to the county for 108 county employees for the coming year would have been $1,120,612.32 under Morgan White’s original quote. It was the first of two health insurance quotations Morgan White would tender to the county supervisors this year.
Stroud group quote, January 19, 2017
John Stroud, a New Albany insurance agent, appeared before the county board at its January 23, 2017, meeting. On behalf of himself and ten other agents, all Union County residents, Stroud asked the Board of Supervisors to consider a quotation from his group for employee health insurance. The county board agreed to accept a quote this year from the Stroud group.
The prior Thursday, January 19, 2017, Stroud’s group had submitted a quotation to furnish health coverage to Union County employees with Blue Cross/Blue Shield of Mississippi as the primary insurance provider and Gulf Guaranty Insurance Company of Jackson as the “gap” insurer. The total premium cost quoted by the Stroud group for the Blue Cross/Blue Shield and Gulf Guaranty coverage for the coming year came to $850,824.
Morgan White second quote, February 21, 2017
Then, on Tuesday, February 21, 2017, the Morgan White Group submitted another group health insurance quotation to the Union County Supervisors. The second Morgan White quotation was for Blue Cross/Blue Shield as the primary insurance — the same company, at exactly the same annual premium, quoted by the Stroud group. In this second quotation Morgan White again offered “gap” insurance from its own AmFirst company. The total annual premium cost under Morgan White’s second quotation on February 21st came to $895,393.44.
The cost difference — $44,569.44 — between the Stroud group’s January 19th quote and the second Morgan White’s quotation on February 21st was due to the cost of “gap” insurance. The total annual “gap” premium in the Morgan White AmFirst proposal was $44,569.44 higher than the Gulf Guaranty “gap” coverage recommended by the Stroud group.
According to county board sources, Morgan White representatives indicated that the original Humana quote in January might be revised downward, depending on a review of the actual costs Humana had experienced in providing health care for county employees. However, nothing in the public record indicates Morgan White ever submitted a revised Humana quote. Instead Morgan White’s second quote, on February 21, was for primary coverage by Blue Cross/Blue Shield, the same company and at exactly the same premium cost that the Stroud group had submitted January 19th, more than a month earlier.
What’s the difference in the “Gap” companies?
The main bone of contention that has arisen since the Board of Supervisors contracted for the coming year’s health insurance with the Stroud group has been over the “gap” insurance and the difference between the two companies, AmFirst and Gulf Guaranty. Insurance companies in the U.S. are rated by at least two professional organizations that evaluate the financial strength of the companies.
AmFirst, as noted earlier, is a wholly owned subsidiary of Morgan White Group. It is rated by an organization called A.M Best, possibly the longest-established insurance financial analysis organization in the United States.
Until May, 2015, A.M. Best gave AmFirst a “B” rating. Early in 2015 Morgan-White acquired some additional insurance companies and made them part of AmFirst Insurance Company. Following those acquisitions, A.M. Best raised AmFirst to an “A-” rating, the one it carries today. Apparently, A.M. Best gives higher ratings to companies who have larger premium volume, which spreads risk over a broader base. Thus, AmFirst has had an “A” rating from A. M. Best for a little under two years.
Gulf Guaranty had a “B” rating from A. M. Best until early 2015, at which time it informed A. M. Best that it no longer wished to be rated by them. At that time Gulf Guaranty switched its rating information to Demotech, another national financial analysis organization for the insurance industry.
Demotech was founded 32 years ago in 1985 and is not as old or widely known as A. M. Best. As we understand it, Demotech bases its ratings of insurance companies more on the strength of the company’s balance sheet than on its total premium income. Thus debt/asset ratios are more strongly considered than premium volume. Demotech rates Gulf Guaranty as “A Exceptional.”
Those interested in knowing more about these financial rating organizations for the insurance industry might be interested in reading this article that appeared in the Insurance Journal: http://www.insurancejournal.com/magazines/coverstory/2003/05/19/29677.htm
What else is in play in this decision?
A less frequently voiced argument regarding the county board’s group health insurance decision has to do with the felony conviction ten years ago of a near-relative of one or more of the insurance agents associated with Stroud. Ken Nowlin, formerly an insurance agent in Ecru, pleaded guilty and was sentenced to 30 months in federal prison in 2007 for bribing a Lafayette County supervisor.
District Four Supervisor Randy Owen has several times emphasized his opposition to the Stroud group’s proposal because some of the agents involved are related to Ken Nowlin. Nowlin’s case is on appeal to the U.S. Supreme Court.
What is the bottom line for Union County taxpayers?
The supervisors voted at a special meeting on February 22, 2017, to contract for employee group health insurance for the year starting April 1st under the health coverage combination proposed by the Stroud group.
There is no way of knowing what the final annual cost for county health insurance might have been if the Stroud group had not been allowed submit its quotation. This was the first time Morgan White had faced a serious competitive quote in many years. However, from what’s on the public record, there can be no dispute of the simple fact that Morgan White’s second quote (Blue Cross) on Feb. 21, was $225,218.88 LOWER that its first quote (Humana), submitted to the county in January.
“I have no doubt at all that we will be paying less for health insurance during the coming year because of the board’s decision to accept the Stroud group’s bid,” Union County Board President David Kitchens told nanewsweb.com on March 22.
The total annual difference in premium cost between the first quotation (Humana/AmFirst) by Morgan White and the winning quotation (Blue Cross/Gulf Guaranty) by the Stroud group is $269,788.32. The total difference between the Stroud group’s quote and Morgan White’s second quotation was $44,569.44.
To see who is in the Union County Agent Cooperative: Union Co. Agents Cooperative Members
To see who voted how on health insurance bids: Approval of Health Insurance
To see a quick summary comparison of quotes:Insurance quotes summary