August 2, 1977

Mr. Q. P. Coleman, Chairman 
Walworth County Commission 
118 E. Third Street 
Mobridge, South Dakota 57601

Official Opinion No. 77-65

County bidding group health insurance contract

Dear Mr. Coleman:

You have requested an opinion from this office based upon the following factual situation:

FACTS: 

At the meeting of the Walworth County Commissioners last Tuesday, the commissioners opened bids for a county group health insurance plan.  The current group health insurance plan is carried with the Reed-Johnston Agency of Aberdeen, and has been in effect for seven or eight years. 
    
At the bid letting, only two companies had submitted formal bids, Prudential and Washington National.  The Reed-Johnston Agency, the current agent, did not submit a formal bid and did not attend the bid letting.  He did, however, notify the commission by letter that his company could not offer anything better than was currently in effect for the group.  The commission discussed the situation but no action was taken.

Based on the above facts, you have asked the following question:

QUESTION: 

Can the current group plan with the Reed-Johnston Agency be continued even though Reed-Johnston never submitted a bid formally in response to the solicitation of bids?

SDCL 7-8-26 authorizes boards of county commissioners to enter into group hospital and medical insurance contracts for the protection and benefit of its officers and employees and to pay not more than one-half of the necessary premiums therefor.  SDCL 7-8-26.1 provides similar authority for the purchase of group health insurance.

SDCL 5-18 is that chapter generally dealing with the subject of competitive bidding requirements for local units of government. SDCL 5-18-3 provides that advertisement for bids is required when the public corporation seeks to purchase materials, supplies or equipment or to construct a public improvement in excess of $2500. Nowhere in the above language is there any requirement that group health insurance be bid competitively.

I fully recognize that there are differences of opinion expressed in former official opinions from this office.  In 1953-54 AGR 99, my predecessor concluded that there was no requirement in the law that the purchase of insurance be bid competitively and consequently, the advertisement for bids would not be required when a public corporation such as a county purchases insurance.  In 1959-60 AGR 254, my predecessor expressed the opinion that county commissioners should not try to circumvent competitive bidding requirements for a project by dividing the total cost of a project among several companies.  Implicit in this statement is the position that county commissioners are required to competitively bid such group hospital and medical insurance contracts.

I am of the opinion that since group health insurance is not within the purview of SDCL 5-18, there is no requirement that such insurance be purchased on a competitive bid basis.  This being so, I believe the county commission is in a position to reject any and all bids and contract with the former carrier of this insurance plan if that is the commission's desire.

To the extent that 1959-60 AGR 254, 255 implies that county group health insurance is required to be bid competitively, the same is hereby superseded.

Respectfully submitted,

William J. Janklow
Attorney General

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