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Thursday, February 15, 2007

Examination of EAP Program Reveals Surge in Spending and Hours

Based on a tip, we made a public records request of the recent city spending on their Employee Assistance Program (EAP). An EAP is supposed to cover short-term psychological services for employees who are experiencing programs of a temporary sort. The previous EAP system was limited to eight visits per issue per year. The city in changing its provider in January, the staff report indicated it wanted an even shorter number of visits:

“The proposed EAP contract allows employees up to six visits per incident per year; our current EAP contract allows employees eight visits per year, with no per issue cap. This has allowed employees to use the current EAP provider for long term psychological counseling. The City’s desire is to only offer short term counseling for employees to help them through a traumatic event that is causing problems at work, home or both. The City has no desire to pay for employees’ long term psychological counseling.”

In January, the City Council voted to authorize a change in the vendor from the locally based Psychological Resource Associates (PRA) to the nationally based Cigna. One of the key reasons was PRA’s bid was $38,000 while Cigna’s was $14,000. (Please see the full details of these plans and some of the concerns about these bids)

At the time, our concern was of the lowball nature of Cigna’s bid, which seems in many ways to be a “loss-leader," since it would appear that they would be losing money on the bid. Large insurance companies and HMO's have been widely known to use a "loss-leader" strategy when bidding on EAP's to get their foot in the door with a customer they are not currently doing business with. Then in future years when submitting bids for the major health benefits portion of a firm's or agency's business (which is extremely lucrative) they point to their ability to substantially reduce costs as evidence of why they should be selected as the new major health benefits vendor.

However, an examination of the recent records reveals something else may be going on. Looking at the three previous full fiscal years, we see a surge in both the amount of hours billed and spending.


Hours Billed


FY 2003-04



FY 2004-05



FY 2005-06



The numbers show that suddenly from 2005-06 a surge in both hours billed and cost. The increase from 230 hours to 311.5 represents an increase of 35 percent over the previous year. While the spending increase represents nearly a 41 percent increase over the previous year.

It is important to note that the new bids were based in part off of the FY 2005-06 spending. Since last year the amount billed was nearly $34,000, the bid was $38,000. Whereas previous years the amount was considerably less and thus the bid by PRA would have been considerably less.

The question has been raised as to whether that was intentional. An audit would be in order at this point, examining why exactly the usage of this program suddenly increased by 35 percent over the previous year while the year before the figures and hours billed were fairly comparable. (There is missing data from the previous year but it would have looked similar to 2003-04 and 2004-05).

There have been suggestions that one thing that occurred in the past year is that some of the patients received more than 8 visits per year. That is one thing an audit would reveal that a public records request cannot. This appears worth examining more to see what is going on, and why the demand for this program suddenly surged in 2005-06 just as the contract was coming up for renewal and just as the city made the determination for the first time in 23 years to put the bids up in the form of a request for proposals (RFP).

---Doug Paul Davis reporting