New Jersey State Health Benefits Program VS. Private Brokers/Healthcare Managers


The New Jersey Comptroller Office provided the report (first below) supporting the premise that many government subdivisions – municipalities, and authorities – are wasting taxpayers money by having private brokers/managers choose their health insurance coverage rather that doing it through the New Jersey State Health Benefits Program (SHBP). The SHBP was established in 1961 to provide health insurance coverage to State employees, retirees and their dependents.

The report, issued late February by Comptroller Matthew Boxer, said four local government bodies collectively would have saved $12.5 million over a two-year period had they been a part of the state’s health benefit plan. That amounts to about $1,000 per enrollee, the report said. An accompanying press release said if those ratios were to hold true for all public workers who aren’t part of the state benefit plan, then more than $100 million would have been saved each year. Fourteen of the state’s 21 counties and 217 of its 566 municipalities were not a part of the state benefit plan as of April 2011, Boxer wrote.

The report also found, of the 4 local government units studied that the they are not procuring their insurance coverage and insurance brokers in accordance with requirements of the Local Public Contracts Law and the State’s “pay to play” law. The audits found several violations of these laws, including the award of a government contract to an insurance broker that had made campaign contributions that should have disqualified the broker from receiving such a contract.

http://www.nj.gov/comptroller/news/docs/shbp_audit_report.pdf

Pay to Play Law looks very good in the paper but lax enforcement can make it irrelevant. Like the bidding law: Either they are porous or they are ignored when nobody is looking. The study that found NJ to be one of the states with the least corruption because of its laws gave me a good laugh. It was published about 2 weeks ago: It was like saying that the Soviet Union was the freest nation in the world because of its constitution.

It did not take long before a critic of the comptroller’s report surfaced. He is the former commissioner of the Department of Banking and Insurance, Tom Considine, now chief operating officer of MagnaCare, a health benefits manager. That is the same line of work that the SHBP does at no cost and obviously that makes the opinion of Mr. Considine much less objective. He is after a piece of the action. In fact he does not hide his desire of getting more public clients. That places his company in direct competition with SHBP.

Ex-insurance commissioner questions claims that N.J. towns would save millions in state health benefit plan | NJ.com.

“We believe in and of itself that (the state benefit plan) is an incomplete solution,” said Tom Considine, now chief operating officer of MagnaCare, a health benefits manager. “Many municipalities fair far better at pursuing a cost-effective solution by going out to bid.”

The last sentence may be a stretch: It is very rarely (if it ever happens) that health insurance goes out to bid; I have never heard of it.

Rather, the contract is awarded to someone (usually a broker/manager such as MagnaCare) under the clause of “professional services” – a loophole of the bidding law. Typically the contract is given to an agent or firm who is already known to the municipality or subdivision of government

Other “professional services” not subject to competitive bidding include law firms, other types of insurance, engineering consulting firms, lobbyists, etc.

He goes on: “One steep hurdle local governments face in switching to the state health plan is getting approval for the move from local unions, a process that is oversimplified in the comptroller report, Considine said.”

In my personal experience, it was quite the contrary: In 1991 I was vice president of my union and convinced then president Elaine Berg to vigorously protest publicly – at the very gate of the Bergen County Utilities Authority on a night when the Commissioners met. The reason was that BCUA had announced it planned to leave New Hersey Health Benefits Plan (SHBP) for a private management company, Insurance Design Administrators, IDA, which was then either owned or partially owned by the the late N.J. Attorney General Gary Edwards, who was also a republican candidate for governor of N.J. but lost in the primary to James Courter who in turn lost to Jim Florio in 1989.

There was no open bid at all in the selection of IDA. I believe that SHBP was a cheaper option. Speculation at the time was that Mr. Edwards needed help to pay his election debts.

Then BCUA Executive Director, Larry McClure, cancelled the plan to abandon SHBP but only temporarily. The BCUA implemented the change sometime later, after I had left my union position. Elaine never felt at ease with those street actions – perhaps too third world for her – and that was one of the reasons why I resigned from the VP post a few months later.

I tend to think that Mr. Considine’s opinion in this issue is greatly influenced by the fact that he wants to expand his business in the public sector. SHBP would be a very powerful competitor with his company. His opinion here, I believe, is contaminated with self-interest.

This is just another issue where both republicans and democrats are guilty alike. Health costs take a good chunk of the government dollars. We better get it right. We can not afford being fleeced any longer.

Just for the record: I support SHBP. I believe the NJ Comptroller is right.

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