Thursday, March 03, 2005

A Lawsuit Accuses HISD Insurance Consultants of Conning the District

Padding the School Policies?
A lawsuit accuses HISD insurance consultants of conning the district
March 3, 2005

Daniel Kramer
Former HISD educator Kimball says he's supporting other employees through the legal action.  

In 2003, HISD officials hailed the latest successes of its human resources outsourcing as a "commitment to excellence and innovation" that would provide workers with "maximum choice at the lowest possible cost, especially in today's expensive health-care market."

That glowing assessment came from the Informed Source newsletter of the Houston school superintendent's office. It quoted then-board member Dianne Johnson -- currently the HISD board president -- as commending the "creative approach" to an employee benefit package that was "nothing short of phenomenal."

More praise was heaped upon the chief architect of this change, Mercer Human Resource Consulting. Since it has gained the district's outsourced contract for insurance coverage responsibilities, the firm anticipates receiving about $25 million through this year in fees on its stated savings for HISD.

However, a recent lawsuit offers up another explanation for Mercer's supposed successes for the school district:

• While touting its services as an "independent consultant," the company's decisions -- and profits -- have been influenced by "commissions" paid to it from HISD vendors that Mercer did not disclose to the district.

• The company claims significant savings for the district, but those have resulted from little more than inferior or reduced insurance coverage. Rather than lowering costs of commissions and fees paid to agents, those payments went to Mercer itself in several instances.

• In at least some cases, Mercer is accused of rigging the bidding process to make it appear that it had substantially reduced costs. Companies participating in those supposedly competitive bid processes would be rewarded with other business, the suit alleges.

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