Faced with cutting $19.7-million from its budget next year, the Pinellas County School District is looking for a way to save money on its insurance broker. But it still expects the work to cost far more than what many Florida school systems pay for similar services.
The district has issued a bid for an employee benefits broker and consultant, a five-year contract valued at about $9.5-million.
It is the first time in nearly two decades that the school system has put the services out for competitive bid. Since 1987, giant Aon Consulting Inc. has had a lock on the job, which has produced millions of dollars annually for the firm in commissions on premiums. Last year, Aon's commissions on Pinellas schools' medical, dental, vision and life policies totaled more than $2.2-million.
The district's decision to bid for a broker is part of a wide-ranging effort to slash costs, with everything from cutting janitors to closing schools being considered.
The request for proposals also comes as the state's Department of Financial Services pursues an investigation into brokers' commission arrangements. New York's attorney general, Eliot Spitzer, raised questions two years ago about incentive fees Aon received from insurers in return for steering accounts their way. The fees, called contingent commissions, were characterized as kickbacks that ended up costing customers higher premiums.
Aon agreed to pay $190-million to settle Spitzer's charges. Late last year, Pinellas schools agreed to accept a check from Aon for about $650,000 as its share of the settlement.
In its request for bids, the district says the selected broker must have a policy against accepting contingent commissions and agree to fully disclose all revenue from carriers and administrators. The broker/consultant also will be expected to disclose annually all revenue earned and services provided.
The Pinellas school district provides benefits to about 14,000 employees. The proposal seeks an experienced company to help negotiate and administer all benefits.
Responses to Pinellas schools' bid are due March 22.
Kris Hundley can be reached at firstname.lastname@example.org or (727) 892-2996.