POPLAR BLUFF, Mo. -- During Tuesday's City Council meeting, City Manager Heath Kaplan was questioned about his recommendation to accept a higher bid from a health insurance broker.

The higher bid was from a firm based overseas. The lower bid was from a locally owned Poplar Bluff financial institution.

Kaplan recommended accepting an $85,000 bid from Aon, a large insurance company based in London and one Kaplan reportedly had done business with. Kaplan, formerly of Michigan, was hired as city manager in July after the firing of Doug Bagby by a new coalition on the council.

The lower bid of about $68,000 annually, based on $20 per city employee per month, was submitted by Eric Wilcoxon of First Community Insurance Group.

"We can provide the same service for $17,000 less," Wilcoxon told the council.

First Community Insurance, an independent agency that can work with other firms searching for the best price, was dealing with Group Benefits Ltd. of Urbandale, Iowa.

"Aon does not have a local representative," said Adam Hutson of First Community Insurance.

The closest Aon office is in St. Louis.

Council members, however, ignored Wilcoxon's plea and voted 5-2 to accept the Aon bid. Voting "yes" were Mayor Angela Pearson, Mayor Pro Tem Jack Rushin, Johnny Brannum, David Johnson and Peter Tinsley. Betty Absheer and Ed DeGaris voted "no."

"We have competent companies here in town. We need to keep the money in town," DeGaris said.

Kaplan advertised for bids in the Daily American Republic in late August and on the city and Missouri Municipal League websites. They were opened Sept. 8.

An insurance review committee composed of seven volunteers from the fire, police, streets and utilities departments reviewed the three proposals received.

The committee determined Aon and First Community Insurance Group met the specifications and invited representatives of both firms for interviews Sept. 15.

"After the interviews were complete, the insurance committee made a final determination of the rating score for each vendor. The recommendation [to accept the Aon proposal] was unanimous," Kaplan said.

He asked Deputy Police Chief Jeff Rolland, the insurance review committee chairman, to explain why the committee supported Aon.

"Both gave very good proposals. We had nothing against First Community. It was a very tough decision," Rolland said. "The committee felt Aon had a better reach into the insurance market, since it is a larger company."

He also said Aon "gives the employees some options and gives the city some discounts."

Two no-bid responses were received from the Morse Harwell Jiles Insurance Agency and First Choice Insurance, both of Poplar Bluff.

Kaplan said MHJ "chose not to bid due to time limits," and First Choice "chose not to bid as broker, but rather bid on an insurance proposal."

DeGaris noted MHJ had provided the city health insurance for 10 years.

"They support the community and had not raised their fees for 10 years," DeGaris said.

Rushin questioned why the city had not sought health insurance bids previously.

Kaplan thanked MHJ for "their years of service to the city, but we wanted to open it up for competition."

He said more time could not be given to prepare a bid because of the "tight timeline" the city faced.

"Due to increased claim cost and funding levels and a negative fund balance in our health insurance fund, the city is looking at ways to control costs for the employees and the employer," Kaplan said.

The city has about 275 employees, with 235 being eligible for benefits. Of the total, 108 are in four union bargaining groups.

"We have a significant deficit," Pearson said. "We needed to bring someone in from out of town to reduce the deficit."

The deficit exceeds $1.7 million. "We have to get this under control," Rushin said.

Robert Kauffman, vice president of Aon, said Aon offers better discounts, will have a local representative available monthly or more often if needed and will make quarterly reports to the city.