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*FUTURA PRESS AUSTIN TEXAS Printers Stationers Mailers Typesetters High Speed Web Offset Publication Press Counseling Designing Copy Writing Editing Trade Computer Sales and Services Complete Computer Data Processing Services IFILIPT1L111111111 512/442-7836 1714 South Congress P.O. Box 3485 Austin, Texas 78764 41: liberty lunch Austin’s only open-air dance floor is now open every day and night for live music and homestyle meals. Come enjoy our laid-back tropical garden atmosphere. Fine wines & beers 405 West Second Street 477-0461 ‘,//;,./ .1 Life Insurance and Annuities Martin Elfant, CLU &Aire 600 Jefferson St., Houston, TX 77002 OF CANACA STEPHEN F. AUSTIN HOTEL Comfortable rooms in an historic setting at reasonable rates. Meeting and banquet facilities.Free parking. BOIS ITAK CAFE Restaurant and Coffee Shop Cocktails in Quiet Atmos ST HEN’S phere, Happy. Hour, Live piano entertainment Located 3 blocks from the Capitol 7th and Congress, Austin, Texas Reservations and information 512/476-4361 CISZ 1QCON New outdoor French Cafe Lunch, Supper & Cocktails In the current round of bidding, Bradford made the lower-cost offer on risk charges. For state fiscal year 1982, both Bradford and NHIC bid their risk charges at 3 percent of pure premium., Bradford, however, agreed to credit 2 percent to the risk stabilization reserve, and asked to retain as profit only 1 percent. Converting those precentages to costs, the Bradford bid would credit $9.1 million to the state’s risk stabilization reserve in 1982, and the corporation would retain $4.6 million. NHIC, on the other hand, would retain as profit the full $11.7 million bid for the risk charge. \(Remember that while both Bradford and NHIC bid a 3 percent risk charge retention, the dollar figure for NHIC is lower because the pure premium figure to which the percentage was applied is to the risk stabilization reserve ultimately revert to the state, TDHR analysts are most interested in comparing the contractor retention, which does not return to the state. Viewed from that perspective, Bradford’s bid of 1 percent retention, costing $4.6 million, is substantially better than NHIC’s 3 percent retention, costing $11.7 million. Over the four year life of the contract, TDHR staff estimated that NHIC would keep between $42 million and $51 million for risk charge retention, while Bradford would keep only between $14 and $16 million. The $28 million to $35 million savings on that line item in the Bradford bid was the largest cost-saver in the contract. A Better Way When the Perot team appeared before the TDHR board on August 25th, they argued vigorously that because they had the lower bid on pure premiums, they should be awarded the contract. Savings on administrative costs, they argued, were minuscule and unimportant when compared to the bottom line savings on pure premiums. As indicated earlier, those arguments premiums which Bradford might collect in excess of actual claims costs would ministrative costs under the contract never come back to the state. Ironically, the controversies over saving administrative costs direct -attention away from the most important financial drains built into this welfare insurance arrangement. The real killer in the welfare budget is a villain we all know too well: inflation. State and federally mandated cost controls notwithstanding, the cost of physician and hospital services for welfare re THE TEXAS OBSERVER 21