Feb. 29--New Jersey towns and counties are missing out on more than $100 million a year in savings by not joining the state's health insurance pool, according to a New Jersey comptroller's report released Tuesday.
The report criticized a government culture described as overly reliant on insurance brokers' advice, and urged officials to diligently research options.
"There's an inherent lack of incentive with the current system, where local government officials are spending money that's not their money. It's taxpayer money," Comptroller Matthew Boxer said. "A lot of government agencies reported to us their brokers didn't even mention the state plan as an option."
The State Health Benefits Program, which provides coverage for more than 850,000 government workers, is designed to save participants money on health insurance through the size of its enrollment.
But only seven of New Jersey's 21 counties as well as two-thirds of its 566 municipalities participate, according to the Comptroller's Office.
The report took particular aim at insurance brokers, who advise clients while often being compensated by insurance companies, saying, "This arrangement inherently could lead to abuse in that brokers are presented with conflicting incentives in seeking lower-cost insurance alternatives."
Analyzing insurance contracts in Essex County; Brick Township, Ocean County; East Brunswick Township, Middlesex County; and Haddon Township, Camden County, the comptroller's staff found those entities could have saved a collective $12.5 million -- or $1,000 per employee -- in 2009 and 2010 had they joined.
Most of the estimated savings were found in Essex County, which employs the brokerage Conner, Strong & Buckelew, headquartered in Marlton and Philadelphia.
Conner Strong, whose executive chairman is Democratic deal-maker George E. Norcross III, maintains hundreds of contracts with public sector clients large and small across the region, according to government records. In 2010, it received more than $400,000 in fees for its work in Essex County, according to the Comptroller's Office.
Essex County has long been the domain of County Executive Joseph DiVincenzo, another one of the state's most powerful Democrats.
Conner Strong released a statement Tuesday taking issue with an assertion in the comptroller's report that brokers had no incentive to recommended the pool to their clients because they would earn smaller fees. The firm pointed to recent recommendations made to two of its clients -- Camden and Gloucester Counties -- to join the state's insurance program.
"Our obligation has and continues to be to provide the best, most objective advice to our clients no matter its impact to our firm," the statement said.
Local officials around the state Tuesday called the comptroller's analysis flawed, pointing to the difficulty in getting unions to agree to lesser benefits and questioning whether short-term cost savings would continue in the future.
Some questioned the report's method of calculating the costs, illuminating the complexity in comparing plans with multiple variables on everything from co-pays to physician choice.
"We told them up front it would be nearly impossible for all our unions to sign off. They did the study anyhow, and it failed to take into consideration all the things we'd implemented over the years to bring our costs down," Essex County Deputy Administrator Paul Hopkins said. "They said we could have saved $9.6 million; we figure it more like $600,000."
Over the last year, many government employees have seen their health benefits decrease, pitting unions against politicians in a state where workers have long exerted influence over the political establishment.
On Tuesday, one of the state's largest public-sector unions, the Communications Workers of America, applauded Boxer's report.
"Municipalities across New Jersey can save millions and provide excellent coverage for their workers by joining the cost-effective State Health Benefits Plan," a union statement said.
Last year, as Gov. Christie was pushing to cut public sector benefits, State Senate President Stephen Sweeney (D., Gloucester) introduced legislation that would have put a moratorium on entry into the state pool, arguing that it was financially unstable.
Boxer, a former prosecutor with the U.S. Attorney's Office who was appointed to his position by Gov. Jon S. Corzine, dismissed that Tuesday.
"We didn't see any issue in the near or long term," he said. "If at some point the finances of the plan do become more of an issue, then local governments would be in a position to withdraw. In the meantime, they're missing out on savings."
In its report, the Comptroller's Office found instances of local governments and brokerages violating state regulations on insurance deals.
It cited Belleville-based Insurance Management & Consulting, which has a contact with Brick Township, as violating the state's pay-to-play laws when it donated $1,700 to the campaigns of the town's mayor and council members in 2009.
The matter has been referred to the state Election Law Enforcement Commission, a spokesman for the Comptroller's Office said.
Insurance Management & Consulting did not return a phone call for comment.
In a series of recommendations, Boxer advised all New Jersey municipalities to consider switching to the state insurance pool and, when dealing with brokers, to avoid commission-based compensation.
Harry Pozycki, chairman of the Citizen's Campaign, an advocacy group promoting government transparency, has been pushing local governments for six months to pass those measures.
He has had some success -- recently persuading the Cherry Hill School District to switch to the state pool. But he said there had been some resistance.
"I think in some instances it's cozy relationships, and in other cases it's just history," he said. "I was at a meeting once and I asked [an elected official] whether she'd switch, and she said, 'Oh, no, we love the broker who works for us, he's such a nice young man.' "
Contact James Osborne at 856-779-3876 or email@example.com.
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