HHS awards $95.6M to GEHA for third-party administrator services, a definitive contract with cost-plus award fee structure

Contract Overview

Contract Amount: $95,576,731 ($95.6M)

Contractor: Government Employees Health Association, Inc.

Awarding Agency: Department of Health and Human Services

Start Date: 2010-06-24

End Date: 2016-04-06

Contract Duration: 2,113 days

Daily Burn Rate: $45.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Healthcare

Official Description: TAS::75 0113 000::TAS HIGH RISK POOL THIRD PARTY ADMINISTRATOR CONTRACT

Place of Performance

Location: LEES SUMMIT, JACKSON County, MISSOURI, 64086

State: Missouri Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $95.6 million to GOVERNMENT EMPLOYEES HEALTH ASSOCIATION, INC. for work described as: TAS::75 0113 000::TAS HIGH RISK POOL THIRD PARTY ADMINISTRATOR CONTRACT Key points: 1. The contract utilized a cost-plus award fee structure, allowing for performance-based incentives. 2. Competition was full and open, suggesting a robust bidding process. 3. The contract duration was substantial, spanning over 2100 days. 4. The awarded amount of $95.6 million represents significant investment in health insurance administration. 5. The North American Industry Classification System (NAICS) code 524114 indicates a focus on direct health and medical insurance carriers. 6. The contract was awarded by the Department of Health and Human Services (HHS). 7. The contractor, Government Employees Health Association, Inc. (GEHA), is a key player in this sector.

Value Assessment

Rating: good

Benchmarking the value of this contract requires detailed analysis of the specific services provided and the prevailing market rates for third-party health insurance administration during the contract period (2010-2016). Given the full and open competition, it suggests that the pricing was likely competitive. However, without specific performance metrics and cost breakdowns, a definitive value-for-money assessment is challenging. The cost-plus award fee structure implies that the government aimed to incentivize efficient performance, which can be a positive indicator of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The number of bidders is not specified, but the nature of the competition suggests that multiple entities likely vied for this significant contract. This level of competition is generally favorable for price discovery and ensuring the government receives competitive offers.

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

Public Impact

Federal employees and annuitants enrolled in health benefit plans administered by GEHA benefit from these services. The contract facilitates the administration of health insurance claims, enrollment, and customer service. The geographic impact is nationwide, covering all eligible beneficiaries of the Federal Employees Health Benefits Program (FEHBP) plans administered by GEHA. The contract supports a workforce involved in health insurance administration, customer support, and claims processing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in cost-plus award fee contracts if not managed diligently.
Long contract duration could lead to vendor lock-in if not periodically re-competed effectively.
Complexity of health insurance administration can introduce risks related to data security and compliance.

Positive Signals

Full and open competition suggests a strong market response and potential for competitive pricing.
Cost-plus award fee structure incentivizes contractor performance and efficiency.
Award to an established entity like GEHA may indicate a track record of successful service delivery in this domain.

Sector Analysis

This contract falls within the Health Insurance and Managed Care sector, specifically focusing on the administration of health benefits for federal employees. The market for third-party administrators is competitive, with numerous companies offering services to both government and private sector entities. The size of the federal health insurance market is substantial, and contracts like this are crucial for its efficient operation. Comparable spending benchmarks would involve analyzing other large-scale health insurance administration contracts within the federal government.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications specifically tied to small business set-asides for this particular award. The focus was on full and open competition, which may or may not have involved small business participation as subcontractors to the prime contractor.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and the relevant program offices within HHS. Accountability measures are embedded within the Cost Plus Award Fee (CPAF) structure, which links a portion of the payment to performance. Transparency is generally achieved through contract award databases and reporting requirements, though specific performance data may not always be publicly available. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Federal Employees Health Benefits Program (FEHBP)
Health Insurance Administration
Third-Party Administrator Contracts
Government Employee Health Benefits

Risk Flags

Contract duration
Cost-plus award fee structure
Potential for performance variability

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $95.6 million to GOVERNMENT EMPLOYEES HEALTH ASSOCIATION, INC.. TAS::75 0113 000::TAS HIGH RISK POOL THIRD PARTY ADMINISTRATOR CONTRACT

Who is the contractor on this award?

The obligated recipient is GOVERNMENT EMPLOYEES HEALTH ASSOCIATION, INC..

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Office of the Assistant Secretary for Administration).

What is the total obligated amount?

The obligated amount is $95.6 million.

What is the period of performance?

Start: 2010-06-24. End: 2016-04-06.

What was GEHA's track record with HHS or similar federal agencies prior to this award?

Assessing GEHA's track record prior to this 2010 award would involve reviewing their performance on previous contracts, particularly with HHS or other federal agencies involved in administering health benefits. Information on past performance evaluations, any disputes, or contract modifications would be crucial. GEHA's long-standing presence in the federal employee health benefits market suggests a history of engagement, but specific details of their performance on prior government contracts would be needed for a comprehensive assessment. This would include examining their ability to meet performance standards, manage costs, and provide satisfactory customer service in similar administrative roles.

How does the $95.6 million award compare to similar third-party administrator contracts for federal health insurance?

Comparing the $95.6 million award requires identifying comparable contracts for third-party health insurance administration within the federal government during the 2010-2016 period. Key comparison points would include the scope of services (e.g., claims processing, customer service, enrollment), the number of beneficiaries served, and the contract type (e.g., cost-plus, fixed-price). Without specific data on other contracts of similar scale and scope, it's difficult to definitively benchmark this award. However, given the size of the federal employee health benefits program, $95.6 million over approximately six years for a definitive contract suggests a significant but potentially competitive price point, especially considering the full and open competition.

What were the primary performance metrics used to determine award fees under this contract?

Under a Cost Plus Award Fee (CPAF) contract, performance metrics are critical for determining the award fee. For a third-party administrator contract like this, typical metrics would likely include: claims processing accuracy and timeliness, customer service response times and satisfaction rates, adherence to regulatory compliance (e.g., HIPAA), enrollment accuracy, and operational efficiency. The specific metrics and their weighting would have been defined in the contract's Performance Work Statement (PWS). The government would evaluate GEHA's performance against these metrics, and a portion of the fee would be awarded based on the assessed level of performance, incentivizing the contractor to exceed minimum requirements.

What is the estimated cost per beneficiary or per claim processed under this contract?

To estimate the cost per beneficiary or per claim, we would need the total number of beneficiaries served and the total number of claims processed over the life of the contract. With the total award of $95.6 million and a duration of approximately 2113 days (roughly 5.8 years), we can calculate an average annual cost of about $16.5 million. If we assume GEHA administered a significant portion of the Federal Employees Health Benefits Program (FEHBP), which covers millions of individuals, the cost per beneficiary would likely be relatively low, in the range of dollars per person per year. Similarly, the cost per claim would depend on the volume of claims processed, which is typically in the millions annually for such a large program.

Were there any significant contract modifications or disputes during the life of this contract?

Information regarding significant contract modifications or disputes for this specific contract (awarded 2010-2016) is not readily available in the provided summary data. A thorough review of the contract's official file, including any amendments, change orders, or records of disputes, would be necessary to answer this question. Such modifications could involve changes in scope, adjustments to pricing, or extensions. Disputes could arise from disagreements over contract terms, performance, or payments. Without access to these detailed records, it's impossible to ascertain if any significant issues occurred.

How does the use of a Cost Plus Award Fee (CPAF) structure impact the overall cost-effectiveness compared to other contract types?

The Cost Plus Award Fee (CPAF) structure aims to balance cost control with performance incentives. Unlike a firm-fixed-price contract, CPAF allows for costs to fluctuate based on performance, potentially leading to higher overall costs if performance is exceptionally good or if cost management is weak. However, it provides flexibility and encourages the contractor to achieve specific, often complex, performance objectives that might be difficult to define in a fixed-price scenario. For services where quality and efficiency are paramount and difficult to pre-define precisely, CPAF can be more cost-effective than fixed-price if the award fee structure is well-designed and effectively managed to drive desired outcomes, preventing cost overruns while ensuring high service levels.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › ADMINISTRATIVE SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 10233SOL00200

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 17306 E 24 HWY, INDEPENDENCE, MO, 64051

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

Financial Breakdown

Contract Ceiling: $95,576,731

Exercised Options: $95,576,731

Current Obligation: $95,576,731

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline