Gallagher tells Dearborn Heights it can cut pharmacy and stop‑loss costs; offers commission‑based first‑year fee
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Summary
Gallagher pitched a Michigan public‑sector team and cited pharmacy and stop‑loss case studies it said produced double‑digit savings. The firm told council its first‑year direct fee is $69,700 and discussed a $25,000 Ebix administration item as an optional charge.
Gallagher representatives led by Chad Hodkinson and Jeff Nielsen presented to the Dearborn Heights City Council during the Nov. 18 study session, pitching market leverage, a dedicated Michigan public‑sector team and examples of recent savings achieved for municipal clients.
Hodkinson described a case study in which Gallagher "was able to help [a client] drive about 20% cost avoidance on their pharmacy program" without reducing employee benefits. He also said Gallagher renegotiated a stop‑loss renewal that moved a 19.3% projected increase to a 7.4% figure with a $90,000 credit, which the presenter said yielded a modest net change for the client.
On fees, Nielsen said Gallagher submitted a direct fee proposal of $69,700 for the first year, funded through embedded commissions in Blue Cross products, and explained an additional $25,000 figure tied to the city—s Ebix benefit platform. Nielsen said Gallagher could bill the city to operate the Ebix system or propose migrating the city to another platform; presenters argued that platform changes could make the city owner of the data and potentially eliminate the $25,000 net cost.
Gallagher also described pooling as an option: Hodkinson said the pool his team cited included more than 230 public‑sector organizations and more than 25,000 member lives, and that the pool—s underwriting and size have historically produced lower trend renewals compared with direct insurer products. He characterized pooling as underwritten to manage the effect of any single large member on the group's costs.
Councilors repeatedly questioned how the firm calculated its projected savings and how costs would evolve in years two and three; Nielsen said Gallagher would price year two based on performance and proposed an illustrative figure in the materials but said the firm would begin at the $69,700 commitment to "prove ourselves to you." Gallagher also described vendor leverage for technology and pharmacy negotiations as practical levers for cost reduction.
No award or preference was announced; council members requested more detail on net city cost, including how commission offsets and platform choices would affect the budget.
