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Florida Company Setting Up RI Health Exchange

Friday, December 14, 2012


A Florida-based consulting firm has been awarded an $18.9 million contract to help the state set up its new health benefits exchange, through which uninsured Rhode Islanders will be able to obtain subsidized insurance plans, according to documents obtained by GoLocalProv through a formal records request.

Those documents show that the Wakely Consulting Group, Inc., a medium-sized consulting firm headquartered in Clearwater, Florida, has been hired to aid the state in a wide range of about ten distinct tasks, including developing a blueprint for the online portal through which insurance will be purchased and spearheading an aggressive marketing and public outreach campaign.

Wakely Consulting is based in Florida but has offices in Louisville, KY and Englewood, CO. Two years ago, it opened an office in Boston. The contract has a start date of March 2012 and ends in December 2014, with an option to renew for two one-year extensions.

Wakely Consulting was one of two firms that responded to a state RFP for the work. The other was Navigant Consulting, Inc., based in Chicago, Illinois.

Wakely Consulting is a health care actuarial firm that boasts a number of key figures involved in the establishment of the Massachusetts Connector—the first health exchange in the country, unveiled under former Governor Mitt Romney. They include the former CFO and Executive Director for the Connector. Drawing upon its Bay State experience, the firm is now helping nearly half a dozen states set up their exchanges. Besides Rhode Island that includes Illinois, Missouri, and Washington.

The firm has grown exponentially during the Obama Presidency. In 2010, it reported gross revenues of more than $7 million, representing a doubling in size since 2008.

Out of state companies dominate

Wakely Consulting is farming out much of the work to five subcontractors, none of whom are based in Rhode Island.

Those subcontractors include KPMG, which boasts that it is “one of the world’s largest professional services firms” with 145,000 employees in more than 150 countries, including the Netherlands, where its global headquarters are located. The other four subcontractors are the Portsmouth, NH-based RKM Research and Communications; GMMB, a PR firm in DC that has worked with the Robert Wood Johnston Foundation; MIT economist Dr. Jonathan Gruber; and Freedman Healthcare, located in Newton, Mass.

Much of the work and cost was expected to be done by the end of this year, totaling $9.1 million, according to Wakely’s original proposal. That drops to $6.4 million next year and tapers off to $5.8 million in the following year, according to an outline of costs.

The total original cost stood at $21.3 million, slightly above the $19.9 million that Navigant estimated in its bid. However, the final amount of the contract for Wakely came in at just under its competitor’s estimate. The project—at least the launch of the exchange—is being federally funded. How the state will keep the exchange running once it is set up, however, has yet to be determined.

Wakely was selected over Navigant based on a scoring process over four criteria: relevant experience and criteria (total possible points was 30), technical approach and understanding of the work (30 points), capacity and resources available to accomplish the work (20 points), and the value the state would be getting for the price (20 points).

Out of a possible 100 points, Wakely’s bid was scored at 82.2; Navigant’s was 64.1. (The review of the bids was done by a committee connected with the Health Insurance Commissioner’s Office.)

It’s not clear what efforts were made to reach out to any eligible Rhode Island companies to do any portion of the work and a spokesman for the Governor’s office yesterday did not respond to a request for comment in time for publication. One key vendor for the project, however, has yet to be determined: the consulting firm that will do the nuts-and-bolts work of building the digital infrastructure for the exchange. The chief spokesperson for the Governor’s office told GoLocalProv late last month that the contract for that work was still being negotiated.

Extensive work required in setting up ‘exchanges’

As for Wakely, the tasks it will perform directly or through its subcontractors are extensive. There are ten discrete tasks that are involved. Those include the following:

■ Technology: Developing a blueprint for the online portal where insurance will be purchased. (Another consultant then will build the online portal based on that blueprint.)

■ Outreach: Wakely will be taking on the task of educating the public, attracting consumers, and working with “stakeholders” to expand insurance coverage.

■ Health plans: The consultant will help the state exchange staff come up with criteria for vetting the health insurance plans that will be offered on the exchange.

■ Future funding: Federal funds run out at the end of 2014. After that the exchange has to be self-sufficient. A lot of the brainstorming on how to do that will happen at Wakely.

■ Financial accountability: Once it is up and running, the exchange will be subject to an annual audit by federal authorities. This oversight “will require the development of robust and reliable data and reporting systems,” something Wakely will help the state to set up.

■ Insurance market: Wakely will also be advising the state on certain “commercial market activities” that might be necessary to “support the viability of the exchange.” In its proposal, the consultant offers this example: “Wakely will provide detailed analyses of the individual-small group market merger decision, including premium and policy impacts, in a series of scenario projections. For example, what happens if the markets are merged or not, when small-group is expanded to 100?”

■ Insurance database: Wakely will oversee the establishment of an “all payor claims database” which is “needed to support reinsurance, risk adjustment and other exchange-related activities.”

Bid documents show that Wakely will devote about 60 of its staff or the staff of its subcontractors to working on the various projects identified above, totaling an estimated 84,238 hours over a three-year period. That works out to an average of more than 460 hours per consultant per year.

Top officials at Wakely will be paid at hourly rates of approximately $400 or more. For example, one of the firm’s top actuaries, Ross Winkelman, will be compensated at hourly rates of $395 in the first year, $406.85 the second, and $419.06 in the third. Patrick Holland, the former CFO for the Massachusetts Connector will be compensated at similar levels, ranging from an initial $361 an hour to $382.98 an hour in the final year. (Holland did not respond to a request for comment yesterday.)

Consultant not well known in state

Wakely Consulting will be intimately involved in almost every aspect of setting up the new exchange, but few in the state’s local health care industry yesterday, when asked for comment, seemed to know much about the company or what it will be doing.

Steve DeToy, spokesman for the Rhode Island Medical Society, said he didn’t know enough about Wakely to have an opinion on them, but he expressed confidence in the selection process used to award them the contract. “I have great faith in the people involved in the process on our end,” DeToy said. “I have no reason to have second thoughts.”

DeToy also pointed out that the exchanges—an integral component of the health care reform law—are a relative novelty and currently exist in only two states, Massachusetts and Utah, making it difficult to have an established benchmark against which to judge local efforts at setting one up in Rhode Island. “I sense we can’t know how good they did until it was up and running,” DeToy said.

The exchange—often compared to a government-run Travelocity for health insurance—is set to go live on January 1, 2012. Enrollment will begin next fall, on October 1.

So far, Rhode Island is ahead of a number of other states in the process, according to DeToy.

Officials at other key organizations in the state health care industry declined comment yesterday, including the Hospital Association of Rhode Island and the United Nurses and Allied Professionals.

Critic: State doesn’t need consultant

But outside the health care industry plans for the exchange are meeting criticism from the Rhode Island Center for Freedom and Prosperity, whose CEO, Mike Stenhouse, told GoLocalProv that he didn’t think the state needed to go to such great expense on consultant fees for setting up a health insurance exchange.

The free market, Stenhouse said, doesn’t need an exchange. “The free market is an exchange,” he said.

He called the project a “waste of time, waste of money, and waste of government and taxpayer dollars.” One of the main goals of the exchange—offering more choices to consumers who can’t afford the limited options currently available—could be achieved by allowing people to buy insurance across state lines, Stenhouse said. That could be done at no cost to taxpayers, as an alternative to spending so much to set up the exchange, he said.

Linda Katz, the Policy Director for The Economic Progress Institute, said using consultants to set up the exchange was more efficient for the state since the same consultants are doing similar work in other states. Katz, who sits on an advisory board for the exchange, said she was generally familiar with Wakely’s reputation for experience in what is basically a brand new field in public policy. “I know they have some good experience under their belt,” she said.

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