TPA%20Cost%20Proposal%20for%20posting.xlsx
XLSX spreadsheet 39 KB Posted
- Solicitation number
- RFP 31786-00190
- Issued by
- Davidson County, Tennessee
About this file
This is a Third Party Administrator (TPA) Cost Proposal and Scoring Guide for the State of Tennessee's public sector health plans. The cost proposal must be completed according to detailed specifications and remains valid for at least 120 days following the proposal opening date. The proposal consists of three primary cost tables: Table A addresses claims costs based on network provider and facility discounts for the Proposed Efficient Network; Table B covers Administrative Services Only (ASO) fees, Utilization Management Program fees, Out of Network Repricing Shared Saving fees, and Pre and Post Payment Review Activities fees on a per employee per month (PEPM) basis for active employees and eligible retirees including COBRA; and Table C establishes a medical and pharmacy trend guarantee with fees at risk for the period January 1, 2029 through December 31, 2032. All monetary amounts must be submitted in U.S. currency limited to two decimal places, and the proposal must be signed by an individual authorized to bind the respondent.
The State will utilize its contracted actuarial consultant Aon to evaluate Table A claims costs using a five-step financial analytic model that establishes baseline claim distributions, validates respondent book of business data, normalizes and calculates discounted claims, trends data to the 2028-2032 evaluation period, and derives total five-year state costs with relative scoring. The Claims Cost Score is calculated as the square of the ratio of the lowest total five-year discounted claims cost to each respondent's cost, with respondents whose overall network discount is within 1.3 percentage points of the lowest-cost respondent receiving a perfect score of 1.00. Table A scores are weighted at 18 points maximum, Table B scores at 15 points maximum based on lowest evaluation costs across all proposals, and Table C scores at 2 points maximum. The proposal evaluation uses consistent trend assumptions of 6 percent annual, 6 percent outpatient facility, 5 percent professional services, and 3 percent laboratory and radiology trends across all respondents for the evaluation period.
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Instructions & Signature
| COST PROPOSAL & SCORING GUIDE |
| NOTICE: THIS COST PROPOSAL MUST BE COMPLETED EXACTLY AS REQUIRED |
| COST PROPOSAL SCHEDULE— The Cost Proposal, detailed below, shall indicate the proposed price for goods or services defined in the Scope of Services of the RFP Attachment 6.6., Pro Forma Contract and for the entire contract period. The Cost Proposal shall remain valid for at least one hundred twenty (120) days subsequent to the date of the Cost Proposal opening and thereafter in accordance with any contract resulting from this RFP. All monetary amounts shall be in U.S. currency and limited to two (2) places to the right of the decimal point. |
| Any blank cells will be calculated as a zero (0). |
| Instructions are at the top of the individual tabs: |
Table A – Claims Table B – ASO and Other Fees Table C – Trend_Fees At Risk
| NOTICE: | The Evaluation Factor associated with each cost item is for evaluation purposes only. The evaluation factors do NOT and should NOT be construed as any type of volume guarantee or minimum purchase quantity. The evaluation factors shall NOT create rights, interests, or claims of entitlement in the Respondent. |
| Notwithstanding the cost items herein, pursuant to the second paragraph of the Pro Forma Contract section C.1. (refer to RFP Attachment 6.6.), “The State is under no obligation to request work from the Contractor in any specific dollar amounts or to request any work at all from the Contractor during any period of this Contract.” | |
| This Cost Proposal must be signed, in the space below, by an individual empowered to bind the Respondent to the provisions of this RFP and any contract awarded pursuant to it. If said individual is not the President or Chief Executive Officer, this document must attach evidence showing the individual’s authority to legally bind the Respondent. | |
| RESPONDENT SIGNATURE: | |
| PRINTED NAME & TITLE: | |
| DATE: |
Financial Analytic Model
TPA RFP Cost Proposal Financial Analytic Model Description
The State has assigned a total of eighteen (18) points to the portion of the Cost Proposal (Table A - Claims) that includes the total cost of claims, based on network provider and facility discounts, for the Proposed Efficient Network.
| Description of the Financial Analytic Model |
| Conceptual Overview |
The State will utilize its contracted actuarial and benefits consultant, Aon, for the evaluation of the network provider and facility discounts section of the cost proposal in order to determine estimated total claims cost. Aon’s methodology and model will evaluate the Respondents in an objective manner, to factor in future trends and to calculate the total cost related to each Respondent. This supplement explains how Aon will calculate each Respondent’s total costs.
| There are five steps in the model, with the analysis conducted for the entire State of TN. |
| 1. Establish baseline State claim distribution |
| The State’s claims data is used to determine the baseline percentage of claims in Inpatient, Outpatient, Professional and Lab/Radiology costs under the current program as well as the current In Network vs. Out of Network utilization (for the incumbent carriers), for inclusion in the model. Claims for the most recent calendar year is used: calendar year 2025, which is incurred January 2025 to December 2025 and paid by September 2026. This experience is used solely to establish the service mix and network‑status utilization for the State population. |
| 2. Load and validate Respondent book‑of‑business data |
| Existing data from each Respondent’s entire book of business for the Proposed Efficient Network, already residing within Aon’s Discount Database tool, is verified for accuracy and completeness. If a Respondent is not currently in Aon’s Discount Database, Aon will work with that Respondent to load its Proposed Efficient Network claims data by the deadline in the RFP Schedule of Events, using the data specifications set forth in section 3.2.5. of Request for Proposal # 31786-00190 and Appendix 7.1. |
| 3. Normalize and calculate discounted claims |
| Each Respondent’s specific pricing terms from its Proposed Efficient Network are processed using a consistent methodology to calculate discounted total claims on a level, unbiased basis, as described under “Estimating the Cost Impact” below. |
| 4. Trend to the RFP evaluation period |
| Each Respondent’s data from their Proposed Efficient Network are trended to the RFP evaluation period (calendar years 2028 through 2032) using the same trend assumptions applied uniformly to all Respondents. |
| 5. Derive total five‑year State cost and relative scores |
| The model calculates each Respondent’s total expected discounted claims cost over the five‑year period. Respondents are then compared by total projected claims cost in a way that does not disclose any Respondent’s proprietary discount or pricing information, while allowing the State to understand which Respondent provides the most favorable pricing terms for the State's business. |
Financial Model Output
Aon will deliver the summary results below to the State. The numerical score will be based on the Respondent’s discounted claims cost, as derived from Aon’s calculations of Respondent data for their Proposed Efficient Network contained within the Aon Discount Database tool. The Claims Cost Score is defined as:
Claims Cost Score for Respondent i
= [(Lowest total five‑year discounted claims cost among all Respondents) ÷ (Respondent i’s total five‑year discounted claims cost)]^2 rounded to two (2) decimal places.
The respondent with the lowest total five‑year discounted claims cost (i.e., the best overall network discount) will receive a score of 1.00. Each other respondent’s score will be the square of the ratio of the lowest total five-year discounted claims cost to that respondent’s total five‑year discounted claims cost, resulting in a value less than 1.00 for respondents with higher costs.
To allow for a reasonable margin around the lowest cost, the State will treat any Respondent whose overall network discount is within 1.3 percentage points of the respondent with highest overall network discount as cost‑equivalent for scoring purposes. For example, if Respondent i’s overall network discount is 60% and the lowest‑cost Respondent’s overall network discount is 61%, Respondent i will receive a score of 1.00 because the difference (61% – 60% = 1%) is within the 1.3‑percentage‑point threshold.
| Vendor #1 | Vendor #2 | Vendor #3 | Vendor #4 | Vendor #5 | |
| 5 yr. Total | 5 yr. Total | 5 yr. Total | 5 yr. Total | 5 yr. Total | |
| Score (1.00 or less) |
The State will use this score to calculate the Cost Proposal Score for Table A – Claims. The vendor(s) with 1.00 score will receive the maximum points for this section of the cost proposal.
Description of Model Calculation
Aon has developed a model to compare the total discounted claims cost of each Respondent. Aon staff will process each Respondent’s Proposed Efficient Network data, residing in the Aon Discount Database tool, through the model. The model calculates the total claims cost impact for each Respondent, trends these results to the 2028–2032 period, and uses them as the basis for the analysis described above.
The projected claims costs derived from this model are then used to determine each Respondent’s relative cost position and to support the scoring of Table A – Claims.
Estimating the Cost Impact
| Step 1 – Baseline State claims and utilization |
| The baseline claims costs are developed using the State’s data warehouse for the incumbent vendors. |
This data is used to determine:
The service weighting of Inpatient, Outpatient, Laboratory/Radiology, and Professional claim categories; and The In‑Network vs. Out‑of‑Network utilization under the current program.
This baseline represents the common claim mix and utilization pattern that is applied across all Respondents.
| Step 2 – Respondent data extraction and validation |
| The second step is to use the Aon Discount Database to pull book‑of‑business data for each Respondent’s Proposed Efficient Network. Aon currently maintains this data for major carriers and several regional administrators in the Tennessee market. If a Respondent that is not currently in the database submits an intent to bid, Aon will work with that Respondent to add its Proposed Efficient Network claims data to the Aon Discount Database by the deadline listed in the RFP Schedule of Events, in accordance with section 3.2.5. of Request for Proposal # 31786-00190 and Appendix 7.1 (Data Specifications). |
During this step, Aon will verify data accuracy and completeness through the following checks, applied consistently to all Respondents:
| 1) Ensure that several key metrics are positive, non-zero amounts |
| 2) Ensure that Adjusted and Projected Eligible amounts are equal |
| 3) Check that claims flagged as Catastrophic have the correct minimum Charged Amount |
| 4) Exclude non-existent ZIP codes |
| 5) Verify CPT and HCPC values |
| 6) Exclude Inpatient charge amounts less than $1 |
| 7) Correct apparent negative discounts (Allowed amount > Eligible amount) by setting Allowed equal to Eligible |
| 8) Verify buckets of Laboratory and Radiology Data from Professional and Outpatient claims |
| 9) Sum data rows by product, 3-digit ZIP and service category |
| Step 3 – Calculating discounted claims on a level basis |
| The third step is to calculate the discounted total claims for each Respondent. The most critical distinction to note is that Aon calculates discounted claims on a level, unbiased basis. Each Respondent is assumed to have the same mix of Inpatient, Outpatient, Professional, and Lab/Radiology claims as is currently displayed by the State’s claims data, and the discounts by category will be applied to the same mix of claims for each Respondent. Therefore, holding all other factors equal, each Respondent’s discounts by category will be the determining factor when total claims costs are measured. |
| 1) Raw discount is calculated as (1-(allowed amount/eligible amount)). |
| 2) For Inpatient claims, the data is case mix adjusted to provide results as though each Respondent experienced the same percentage of claims by service category. |
| 3) Professional data is normalized across national eligible-charge weights. |
| 4) Outpatient data is provided in six seven broad categories: Emergency Room, Surgery, Radiology, Pathology (Laboratory), Ancillary, MedicalRx and Other. |
| 5) No case mix adjustment is applied for Outpatient or Laboratory / Radiology data. |
| 6) Calculate In-Network Utilization using seven claims categories: direct carrier contracted claims, claims subject to surprise billing rules, third party wrap network claims, individually negotiated claims, claims subject to reference based pricing schedule, claims paid as a percentage of billed charges and all other claims. In-Network utilization is calculated as the percentage of total eligible charges from direct carrier contracted claims and Claims subject to surprise billing rules divided by total eligible charges across all categories. |
| 7) Calculate Out-of-network discounts: Allow for the difference in Eligible and Allowed charges on Out-of-Network contracted claims but set discounts to 0% for all Non-Contracted claims. |
| 8) Compute the overall discount by 3-digit ZIP, weighted by service category and In-Network / Out-of-Network Utilization weighting, as determined in Step 1, modeled after existing State data. |
| 9) Credibility and Confidence interval measures: The model will report a high and low discount value for each 3-digit ZIP, based on credibility of the claims data within that area. If a Respondent has too little claims experience in a particular market, the reported discounts will not be as credible as in markets where the Respondent has considerable claims experience. |
| Step 4 – Trending to the 2028–2032 evaluation period |
| The fourth step is to trend to the years 2028 through 2032. Aon will use the following table as the basis for assumptions in trending, applied consistently to all Respondents: |
| Table 1 |
| Trend Assumptions |
| 2028 | 2029 | 2030 | 2031 | 2032 | |
| Annual Trend | 6% | 6% | 6% | 6% | 6% |
| Outpatient Facility | 6% | 6% | 6% | 6% | 6% |
| Professional Services | 5% | 5% | 5% | 5% | 5% |
| Laboratory / Radiology | 3% | 3% | 3% | 3% | 3% |
| Step 5 – Five‑year total cost and scoring |
| The fifth step will be to use the total claims cost derived from this model to calculate each Respondent’s total expected cost over the five year period. |
| The Respondent(s) with the 1.00 financial model score(s) shall be awarded the maximum points for the financial evaluation. The other Respondent’s points will be based on the square of the ratio of the lowest total five-year discounted claims cost to that respondent’s total five‑year discounted claims cost. For example, if a vendor has 10% higher costs than the lowest Respondent, the score will be (1/1.1)^2 = .83. |
Aon will NOT factor in the time value of money in calculating the 5-year value of the proposal. In other words, it is assumed that a dollar in 2032 is the same as a dollar in 2028.
Table A - Claims RFP Attachment 6.3
| Table A | ||
| Provide the name of the Proposed Efficient Network which the Respondent intends to utilize for delivery of services. The State’s actuarial and benefits consultant, Aon, will supply the State with a Claims Cost Score for each Respondent to this RFP based on the Respondent’s Proposed Efficient Network claims information on file with Aon (refer to Appendix 7.1 and the Financial Analytic Model tab). The Respondent with the lowest cost (highest overall network discount) along with any Respondent whose overall network discount is within 1.3 percentage points of that lowest‑cost Respondent, will receive a score of 1.00. All other Respondents’ scores will be calculated as the square of the ratio of the lowest total five‑year discounted claims cost to that Respondent’s total five‑year discounted claims cost. | ||
| Proposed Efficient Network | ||
| Identify the proposed Efficient Network (Must be identical to the networks listed in Section D.2) | ||
| STATE USE ONLY - Claims Cost Score (Score provided by Aon Consulting which consists of the claims cost calculated by Aon) | ||
| Claims Cost Score (not to exceed 1.00) | ||
| The Solicitation Coordinator will use the Claims Cost Score shown above and use the formula below to calculate the Cost Proposal Score for Table A Score. Numbers rounded to two (2) places to the right of the decimal point will be standard for calculations. | ||
| Claims Cost Score: | ||
| x 18 |
(maximum section score) = Table A SCORE:
State Use – Solicitation Coordinator Signature, Printed Name & Date:
Table B - ASO and Other Fees
| RFP Attachment 6.3 |
| Table B |
| INFORMATION FROM RESPONDENT - |
ROW 8: Provide Administrative Services Only (ASO) PEPM (Per Employee Per Month) fees for active employees and eligible retirees (including COBRA). When bidding, Respondents are required to submit an administrative fee bid inclusive of both the efficient and broad network that may be offered for enrollment.
ROW 9: Provide Utilization Management Program PEPM (Per Employee Per Month) Fees for all utilization management, prior authorization, cost containment, quality containment, site of care, etc. services and programs offered by the Respondent and outlined in the Pro Forma Contract for active employees and eligible retirees (including COBRA).
ROW 10: Provide Out of Network Repricing Shared Saving PEPM (Per Employee Per Month) Fees, excluding claims subject to the No Surprises Act, for active employees and eligible retirees (including COBRA).
ROW 11: Provide Pre and Post Payment Review Activities PEPM (Per Employee Per Month) Fees for active employees and eligible retirees (including COBRA).
If the sum of the Evaluation Cost on a table equals zero, the Respondent will receive the maximum section score in the table. In this scenario, the State will use one cent (.01) in the formula listed in the table as the 'lowest evaluation cost amount from all proposals" to calculate all other proposals' point allocations.
This table shall include all costs to deliver the services outlined in the Scope of Services of the RFP Attachment 6.6., Pro Forma Contract, except actual claim payments for covered persons. Any fees not listed in the table below or outlined in Contract Section C.3 of the Pro Forma Contract are not permitted to be charged or invoiced by the Contractor.
*"Total enrollment levels” reflects all employees/retirees (heads of contract), including COBRA, covered in all networks (Efficient and Broad) offered by the Contractor. January enrollment calculated by the State’s Edison system will be used to determine the enrollment-based fee level annually, and the fee level set in January of each year shall remain constant for the remainder of the calendar year.
The multiple of the PEPM and the actual number of employees/retirees (or heads of contract), including COBRA, for the billing month will generate the Contractor’s total monthly payment for each Program Type fee listed in the table below.
For reference, the current number of employees/retirees (heads of contract) as well as the total number of members are available in Appendices 7.5, 7.6, and 7.7.
Respondent shall fill out columns B, C, D, E, and F in rows 8-11 with the applicable Administrative Services Only (ASO), Utilization Management, Out of Network Repricing Shared Savings, and Pre and Post Payment Review Activities.
The Solicitation Coordinator will sum Columns B, C, D, E, and F (Column G) and multiply it by twelve (12) (Column H) for an Evaluation Cost (Column I) for each row 8 through 11. The Solicitation Coordinator will the sum Column I for a total (I12).
Program Type
(TOTAL ENROLLMENT LEVELS*
| for all networks (Efficient and Broad) offered) | TOTAL FEE PER EMPLOYEE PER MONTH BY CONTRACT PERIOD | State Use Only | |||||||
| 1/1/2028 – 12/31/2028 | 1/1/2029 – 12/31/2029 | 1/1/2030 – 12/31/2030 | 1/1/2031 – 12/31/2031 | 1/1/2032 – 12/31/2032 | Evaluation Cost Amount (Sum of Columns B, C, D, E, and F) | Multiplication | Evaluation Cost (SUM x Multiplication) | ||
| Administrative Services Only (ASO) fees | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | PEPM total | 12 | Total (Column G x H ) | |
| Utilization Management Program Fees | |||||||||
| (prior authorization, cost/quality containment, etc.) | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | PEPM total | 12 | Total (Column G x H ) | |
| Out Of Network Repricing Shared Saving Fees | |||||||||
| (excludes Claims Subject to the No Surprises Act) | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | PEPM total | 12 | Total (Column G x H ) | |
| Pre and Post Payment Review Activities Fees | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | $ XX.XX /PEPM | PEPM total | 12 | Total (Column G x H ) | |
| TOTAL | |||||||||
| EVALUATION COST AMOUNT (Total evaluation costs in cell I13 above): | |||||||||
| The Solicitation Coordinator will use this sum and the formula below to calculate the Cost Proposal Score. Numbers rounded to two (2) places to the right of the decimal point will be standard for calculations. | |||||||||
| lowest evaluation cost amount from all proposals |
evaluation cost amount being evaluated x 15 (maximum section score)
= TABLE B SCORE:
State Use – Solicitation Coordinator Signature, Printed Name & Date:
Table C - Trend_Fees At Risk
| RFP Attachment 6.3 |
| TABLE C |
| INFORMATION FROM RESPONDENT - Repondent shall provide PEPM payout (column F) for lines 12 through 14. Soliticitation Coordinator will calculate the fees at risk based on the Scoring Weight (column G) below and rank respondents based upon the evaluation cost amount (column H). |
| Effective Date: January 1, 2029 - December 31, 2032 | |
| MEDICAL/MEDICAL PHARMACY TREND GUARANTEE DETAIL | |
| Guaranteed Medical Trend | 4.0% |
| FEES AT RISK PAYOUT SCHEDULE | STATE USE ONLY | ||
| Medical Trend Achieved | Payout PEPM | Scoring Weight | Evaluation Cost |
(Payout PEPM x Scoring Weight)
| less than 5% (Risk-Free Corridor) | N/A | ||
| 5% - 5.99% trend | $ XX.XX /PEPM | 65% | Total (Column F x G) |
| 6% - 6.99% trend | $ XX.XX /PEPM | 25% | Total (Column F x G) |
| 7% trend and above | $ XX.XX /PEPM | 10% | Total (Column F x G) |
| SUM TOTAL |
| MEDICAL TREND GUARANTEE PROVISIONS | |
| Annual Reconciliation to be Performed by the State's Actuarial Consultant using the provisions outlined below. These provisions are not utilized in the scoring of this RFP. | |
| � Amount at Risk - this guarantee is a one-way trend guarantee with a 1.0% risk-free corridor, payout steps as noted above | |
| � Trend will be measured from the Base Period (Jan-2028 - Dec-2028) to the Guarantee Period (Jan-2029 - Dec-2029). | |
| For subsequent trend measurements the Base Period and Guarantee Period roll forward each year thereafter. | |
| Trend will be reconciled on a total Medical spend (total spend = employer spend + employee spend) basis. | |
| Trend will be reconciled using allowed amounts for in-network and out-of-network claims incurred. | |
| � The determination of the payout will be adjusted for: | |
| Claimants and their associated claims in excess of $100,000 (including claims under $100K). | |
| Demographic changes from the Base Period to the Guarantee Period. | |
| Geographic factors that change from the Base Period to the Guarantee Period. | |
| Other factors as determined by the State. |
| EVALUATION COST AMOUNT (sum of evaluation costs above): |
| The Solicitation Coordinator will use this sum and the formula below to calculate the Cost Proposal Score. Numbers rounded to two (2) places to the right of the decimal point will be standard for calculations. |
| Sum Total being evaluated |
Highest Sum Total From all Proposals x 2 (maximum section score)
= TABLE C SCORE:
State Use – Solicitation Coordinator Signature, Printed Name & Date:
STATE USE ONLY - Scoring tables RFP Attachment 6.3
| COST PROPOSAL SCORE TOTAL | |
| STATE USE ONLY | |
| The Solicitation Coordinator shall use the scores from all tables, derived from the proposed cost amounts and the formulas, to calculate the COST PROPOSAL SCORE. Calculations shall result in numbers rounded to two decimal places. | |
| Table A Score | |
| Table B Score | |
| Table C Score | |
| TOTAL COST PROPOSAL SCORE | 0.00 |
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