HHS awards $157.7M contract to CGS Administrators for direct health and medical insurance carrier services

Contract Overview

Contract Amount: $157,685,898 ($157.7M)

Contractor: CGS Administrators, LLC

Awarding Agency: Department of Health and Human Services

Start Date: 2015-09-07

End Date: 2023-08-31

Contract Duration: 2,915 days

Daily Burn Rate: $54.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: IGF::CT::IGF JB PROCUREMENT

Place of Performance

Location: NASHVILLE, DAVIDSON County, TENNESSEE, 37228

State: Tennessee Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $157.7 million to CGS ADMINISTRATORS, LLC for work described as: IGF::CT::IGF JB PROCUREMENT Key points: 1. Contract value represents significant investment in health insurance administration. 2. Competition dynamics suggest a robust market for these specialized services. 3. Contract duration indicates a long-term need for these administrative functions. 4. Performance context is crucial given the sensitive nature of health insurance data. 5. Sector positioning highlights the critical role of intermediaries in healthcare. 6. Potential for cost efficiencies exists through effective contract management.

Value Assessment

Rating: good

The contract value of $157.7 million over its period of performance appears reasonable for the scope of services provided, which involves direct health and medical insurance carrier functions. Benchmarking against similar contracts for large-scale health insurance administration would provide a more precise value-for-money assessment. However, the cost-plus award fee structure allows for incentives tied to performance, suggesting an effort to ensure value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders likely had the opportunity to submit proposals. The presence of two bids suggests a competitive environment, which generally benefits price discovery and can lead to more favorable terms for the government. The specific details of the bidding process and the number of proposals received would offer further insight into the intensity of the competition.

Taxpayer Impact: Full and open competition typically results in better pricing for taxpayers by fostering a competitive environment among potential contractors.

Public Impact

Beneficiaries include individuals utilizing health insurance services managed under this contract. Services delivered encompass the administration of direct health and medical insurance. Geographic impact is likely nationwide, given the scale of federal health programs. Workforce implications may involve administrative and support roles within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns in cost-plus award fee contracts if not closely monitored.
Dependence on a single contractor for critical health insurance administrative functions.
Ensuring data security and privacy for sensitive health information is paramount.

Positive Signals

Awarded through full and open competition, suggesting a competitive process.
Cost-plus award fee structure incentivizes contractor performance.
Long contract duration indicates a stable and ongoing need for these services.

Sector Analysis

The healthcare insurance sector is characterized by significant government involvement, particularly through programs like Medicare and Medicaid. This contract falls within the administrative services segment of the healthcare industry, which is crucial for the efficient operation of insurance programs. The market for these services is substantial, with numerous large and specialized firms competing for government contracts. Benchmarks for similar administrative contracts often run into hundreds of millions of dollars annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Therefore, the primary focus is on large-scale service providers. Subcontracting opportunities for small businesses may exist, but they are not explicitly mandated by the contract's primary structure. The impact on the small business ecosystem would depend on the extent to which the prime contractor engages small businesses for specialized support services.

Oversight & Accountability

Oversight for this contract would typically be managed by the Centers for Medicare and Medicaid Services (CMS) contracting officers and program managers. Performance metrics and financial reporting requirements are standard for cost-plus award fee contracts to ensure accountability. Transparency is generally maintained through contract award databases and public reporting, although specific operational details may be proprietary. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Medicare Administrative Contractors (MACs)
Medicaid Information Technology System (MITS)
Health Insurance Marketplace

Risk Flags

Potential for cost overruns in CPAF contracts.
Ensuring data security and privacy of sensitive health information.
Contractor performance against defined metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $157.7 million to CGS ADMINISTRATORS, LLC. IGF::CT::IGF JB PROCUREMENT

Who is the contractor on this award?

The obligated recipient is CGS ADMINISTRATORS, LLC.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Medicare and Medicaid Services).

What is the total obligated amount?

The obligated amount is $157.7 million.

What is the period of performance?

Start: 2015-09-07. End: 2023-08-31.

What is the track record of CGS Administrators, LLC in managing similar federal health insurance contracts?

CGS Administrators, LLC has a significant history of managing federal contracts, particularly within the Centers for Medicare & Medicaid Services (CMS) domain. They have been involved in various administrative functions related to Medicare and other health insurance programs. Their experience often includes claims processing, provider enrollment, and customer service. A detailed review of their past performance on similar contracts, including any past performance evaluations or disputes, would be necessary to fully assess their track record. This includes examining their ability to meet performance metrics, manage costs, and adhere to regulatory requirements within the complex healthcare landscape.

How does the awarded amount compare to the estimated value or previous contract values for similar services?

The awarded amount of $157.7 million over the contract's duration needs to be compared against the initial estimated value and any preceding contracts for the same or substantially similar services. Without access to the original solicitation's estimated value or historical spending data for this specific function, a direct comparison is challenging. However, the duration of the contract (2915 days, approximately 8 years) suggests that the annual expenditure is in the range of $20 million. This figure should be benchmarked against industry standards for health insurance administration services of comparable scope and complexity to determine if it represents good value for money.

What are the primary risk indicators associated with this type of cost-plus award fee contract?

Cost-plus award fee (CPAF) contracts carry inherent risks, primarily related to cost control and potential for contractor inefficiency. The government agrees to cover all allowable costs plus a fee that is composed of a fixed base amount and an award amount that depends on meeting performance objectives. Key risks include the potential for cost growth if performance objectives are not clearly defined or if the contractor has less incentive to control costs compared to fixed-price contracts. Effective oversight, robust performance metrics, and diligent auditing are crucial to mitigate these risks and ensure the government receives good value. The government must actively manage the award fee determination process to ensure it accurately reflects performance.

What is the expected effectiveness of the services delivered under this contract in supporting federal health programs?

The effectiveness of the services delivered under this contract is critical for the smooth operation of federal health programs, likely related to Medicare or other CMS initiatives. As a direct health and medical insurance carrier, the contractor plays a vital role in processing claims, managing provider networks, and ensuring beneficiaries receive necessary care. The success of these services directly impacts patient access to healthcare, program integrity, and overall healthcare system efficiency. Performance metrics within the contract, particularly those tied to the award fee, will be key indicators of effectiveness. Consistent achievement of these metrics suggests the services are meeting their intended objectives.

What are the historical spending patterns for direct health and medical insurance carrier services by the Department of Health and Human Services?

Historical spending patterns for direct health and medical insurance carrier services by HHS are substantial, reflecting the vast scale of federal healthcare programs. Agencies like CMS regularly award multi-million dollar contracts for claims processing, eligibility determination, and other administrative functions. These contracts often span several years due to the complexity and continuity required. Analyzing past spending trends for similar services can reveal patterns of cost escalation, shifts in contracting strategies (e.g., from sole-source to competitive), and the overall budget allocation towards administrative support within HHS. This contract's value should be viewed within that broader historical context.

Industry Classification

NAICS: Finance and Insurance › Insurance Carriers › Direct Health and Medical Insurance Carriers

Product/Service Code: SOCIAL SERVICES › SOCIAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HHSM5002014RFP0069

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Blue Cross & Blue Shield of South Carolina

Address: 2 VANTAGE WAY, NASHVILLE, TN, 37228

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $173,690,124

Exercised Options: $173,185,124

Current Obligation: $157,685,898

Actual Outlays: $46,940,711

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline