AGENDA MEMORANDUM                        Item No.          4f 
ACTION ITEM                            Date of Meeting     February 28, 2017 
DATE:     February 17, 2017 
TO:        David Soike, Interim Chief Executive Officer 
FROM:    Tammy Woodard, Human Resources Director, Total Rewards 
Paula Edelstein, Senior Director, Human Resources 
SUBJECT:  Contract to provide dental claims administration services for the Port's self-insured
dental plan. 
Amount of this request:               $1,900,000 

ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to conduct a competitive
procurement and execute a service agreement with a dental claims administrator for the Port's
self-insured dental plan for five years with a possible extension of an additional five years and a
maximum duration of 10 years.  The contract will be effective January 1, 2018, and have an
estimated value of $1,900,000. 
EXECUTIVE SUMMARY 
The Port provides dental coverage for employees as part of the Total Rewards Package.  This
benefit has been provided through a self-insured dental plan since 2011. Self-insuring this plan
permits the Port to offer the benefit more cost effectively than purchasing an insurance plan.
The self-insured plan permits the Port to pay actual dental claims incurred by Port employees
and their covered family members plus a fee to a claims administrator for processing the claims
and maintaining a network of dentists and dental service providers.  With the self-insured
arrangement the Port does not pay the state premium tax or profit margin, both of which are
built into insurance premiums paid with a fully insured arrangement. 
The current dental claims administration contract expires at the end of 2017. Because of the
potentially significant costs and other implications of changing vendors, including major
disruptions for covered employees and their families, we are requesting authorization for a five
year contract with the option to extend for an additional five years. 
JUSTIFICATION 
A self-insured dental plan is more cost effective than a fully insured plan. For various reasons,
including state premium taxes and profit margins of insurance companies, the cost of a selfinsured
dental plan is typically 10% to 15% less than a fully insured plan. In addition to the cost

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COMMISSION AGENDA  Action Item No. 4f                                   Page 2 of 5 
Meeting Date: February 28, 2017 
savings, employers with self-insured plans have more flexibility in determining what benefits
are covered, how they are covered, and the deductible and coinsurance amounts for their
plans. This permits the Port to customize the dental plan offered to employees so it aligns with
Port goals for a healthy workforce, cost containment, and providing a competitive benefit. The
approximate 2017 cost of our self-insured dental plan is $1.5 million so self-insuring this plan
saves the Port $150,000 to $225,000 annually. 
The cost of conducting a procurement for the dental claims administration services and
potentially changing vendors is significant.  Consulting support for the procurement process is
essential to evaluate the implications of submitted proposals.  Costs of transitioning from one
TPA to another include:  ICT resources to update data interfaces; communications costs,
including the development and production costs, to ensure employees fully understand how
their dental coverage will be administered with a new vendor; staff time to establish new work
flows, set up new vendors, update procedures, and other related tasks. These costs can run as
high as $150,000 and allocating them over a 10 year contract is more cost effective than
allocating them over a five year contract. 
There is also a notable impact to employees and their families when the administrator of their
dental plan changes.  Based on staff experience with the last benefit plan vendor change, it
took about three years for employees to become familiar with the new vendor's web site and
where to find needed information, understand how their benefits were being processed, and
understand how to contact the vendor for support when needed. It also took about this long
for Port staff and the vendor's staff to work through all the complexities and different vendor's
approach to the complexities of administering a benefit plan.  With a five year claims
administration contract the transition period is just winding down when the process begins
again to conduct a procurement and potentially change vendors.  This keeps employees and
staff in a nearly constant state of transition which takes time away from other important work.
For these reasons we are requesting authorization for a contract with a 10 year maximum
duration. 
DETAILS 
A competitive selection process is required by Port policy.  The selection process will seek to
minimize the disruption employees and their families may experience by having their current
dental provider being 'out of network' in the event the  selected claims administrator has a
different network of providers who is not the incumbent and by seeking a claims administrator
who can administer the Port's current dental plan design. The selection process will also seek
to consider the customer service levels of the proposing vendors and ensure a positive
customer service experience for Port employees when they must contact the claims
administrator. 
Claims administrators are paid a monthly fee per enrolled employee. While we cannot know
what the proposed fees will be, we are projecting slight fee increases, 2% per year, in the cost
estimates.  The larger impact on the total cost of the contract is the number of employees

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COMMISSION AGENDA  Action Item No. 4f                                   Page 3 of 5 
Meeting Date: February 28, 2017 
covered by the Port's self-insured plans.  Anticipated new FTEs are factored into the cost
estimate as is a potential annual increase in the number of employees eligible for this coverage
over the duration of the contract.
Scope of Work 
The contracted claims administrator will maintain a network of dental providers who will
provide services to covered Port employees and their families at negotiated rates that are less
than the providers' standard billing rates.  They will also receive claims, review them to see if
they are for covered services and, if they are, determine the Port's and employee's shares of
the cost and pay the Port's share to the providers and issue an Explanation of Benefits to the
employee summarizing the amount the Port paid and their portion of the claims costs. 

ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Return the Port's dental plan to a fully insured plan 
Cost Implications: With a ten year fully insured plan the Port's costs would be $3,300,000 to
$4,000,000. This is $1,400,000 to $2,100,000 higher than with a self-insured arrangement. 
Pros: 
(1)     Fully insured plans are easier for staff to administer than self-insured plans: 
procurements for claims administration services are not necessary, 
reporting the financial status of our plans to the State is not required with fully
insured plans, and 
budgeting for the fixed insurance cost is less complex than budgeting for self-
insured plans. 
Cons: 
(1)      The Port would not realize the full benefit of plans we have in place to encourage
employees' attention to their dental health as we would pay a fixed premium to the
insurance company that is based on expected claims costs. With self-insured plans,
we pay only for actual claims costs vs. the insurance company's estimation of what
our claims will be. 
(2)      We would need to conduct a procurement process to select and contract with a
dental network provider. 
(3)      Fully insured plans cost more than self-insured plans because of the state's premium
tax and the insurance company's profit margin that are built into the premiums. 
This is not the recommended alternative. 


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COMMISSION AGENDA  Action Item No. 4f                                   Page 4 of 5 
Meeting Date: February 28, 2017 
Alternative 2  Perform the claims administration work in-house. 
Cost Implications: The Port would need to hire staff to process the actual claims and contract
with a vendor to maintain a provider network for the plan.  This could cost as much as
$3,420,000 over the ten year term of the contract, approximately 75% more than contracting
with a claims administrator. The Port would also need to purchase or design and build a claims 
processing system. Our benefits consultant is not aware of any organization that has purchased
a system like this so we have a very rough estimate of $1 million to purchase the system. This
does not include the cost to implement and maintain the system. 
Pros: 
(1)   This option would give the Port the greatest control over customer service for our
covered employees and accuracy of claims processing and payment. 
Cons: 
(1)   We would not have the economies of scale that vendors who are in the business of
providing these services would have. 
(2)   The time required to define the work, hire and train staff, procure and implement a
claims administration system would be significant. 
(3)   We would need to identify space, in facilities that are running out of space, for claims
processing employees and claims records that would be secure and accessible only
with proper credentials. 
(4)   Employees would likely be very concerned about other employees having access to
their health records. 
(5)   This alternative would very likely cost more in the long run than contracting with
vendors to provide these services. 
This is not the recommended alternative. 
Alternative 3  Maintain a self-insured dental plan and conduct a competitive selection process
for a claims administrator. 
Cost Implications: The cost of a 10 year contract is estimated at $1,900,000 and in addition we
will need $15,000 in consulting support to assist with evaluating proposals. 
Pros: 
(1)   Contracting  with  a  vendor  for  claims  administration  and  network  management
services simplifies the work required to obtain these services in a cost effective
manner. 
(2)   This alternative allows the Port to capitalize on the vendor's broad-based knowledge
and expertise to the benefit of the Port sponsored dental plan as well as the
employees and their family members covered by it. 


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COMMISSION AGENDA  Action Item No. 4f                                   Page 5 of 5 
Meeting Date: February 28, 2017 
Cons: 
(1)   The work required to carefully craft procurement materials, review proposals and
select a vendor who best meet the needs of the Port, its dental plan and the
employees covered by the plan is significant. 
(2)   Staff time to manage the relationship with the TPA and resolve issues with them could
be significant. 
This is the recommended alternative. 
Annual Budget Status and Source of Funds 
Funding for the dental claims administration services are part of the dental plan costs. These
costs are shared by the Port and enrolled employees via premium sharing payroll deductions. 
ATTACHMENTS TO THIS REQUEST 
None 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None 










This version as revised 9/16/2016