By Harry S. Pozycki—
NEW JERSEY — I am pleased to report that there is actual good news on the local government spending front. Regular citizens throughout New Jersey are taking matters into their own hands and saving millions of tax dollars by successfully advancing a practical and robustly competitive model for the purchase of health insurance for local government employees and retirees as well as for municipalities and school board’s other insurance needs. Among the cities and towns now realizing significant cost-savings by adopting this new, sensible approach are Camden, Hamilton, Perth Amboy, Newark and Toms River.
This new business-like approach—putting property taxpayers first—offers a stark contrast to the old and expensive way of purchasing insurance still used by most New Jersey communities. In most New Jersey towns, school districts, and counties insurance brokers are still paid a percentage commission by the insurance company based on the total benefits package while they are advising the local government officials on what is best for the taxpayer. When brokers work on this commission basis, there is a strong incentive to recommend a more expensive benefits package than necessary in order to get the biggest payday. Making this situation even worse, most brokers are not covered by pay-to-play reform laws restricting political contributions and are free of the needed scrutiny that comes with annual contribution disclosure requirements because they are under contract to the insurance companies—not the local government. This combustible combination has provided fertile soil for corruption resulting in convictions for bribery and kickbacks in Hamilton and Toms River, among other municipalities.
To address the problem of wasteful and sometimes corrupt government insurance purchasing, The Citizens Campaign model ordinance for municipalities and a model resolution for school districts require brokers to work exclusively for governing bodies or school districts and to be selected on a competitive flat-fee basis. It also mandates that towns, counties and school districts get multiple quotes, including quotes from the State Health Benefits Plan, a Joint Insurance Fund, and private insurers. It is important to note that in some cases it will be most cost-effective for a municipality or school board to join the State Health Benefits Plan and meet any additional health insurance needs by purchasing supplemental private insurance and that the model ordinance envisions and permits this alternative.
The potential savings, if all New Jersey municipalities and school boards adopted this competitive model is well over $200 million, according to State Comptroller Matt Boxer. Just as importantly, given that health insurance costs in particular are likely to continue to rise as baby boomer employees move into retirement and use more health care services, adopting this model now is an essential part of local governments ensuring a sound fiscal future.
While the economy is starting to pick up, too many New Jersey families remain financially squeezed and local governments will still need to do more with less. There is simply no excuse for continuing to waste money through using an uncompetitive method of purchasing insurance that rewards insurance brokers with big paydays and fills the campaign coffers of state and local politicians and party power brokers, but shortchanges taxpayers. The all too thriving business of trading lucrative commissions for insurance broker contributions is at least for now preventing any movement on state legislation that would put sensible rules in place for all municipalities.
That is why it is all the more important for citizens throughout our state to step up to the plate and present a local model ‘best practice’ insurance law to their hometown governing body or school board. The Citizens Campaign will be there to assist; we know from the experience of successful citizens in communities as different as Newark, Hamilton and Toms River that real savings are more than possible. They are just around the corner.
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Mr. Pozycki is the Chairman of The Citizens Campaign, a non-partisan, non-profit 501 (c)(3) organization, dedicated to fixing our democracy from the bottom up by training citizens in no-blame politics and evidence-based problem solving. The Citizens Campaign is based in Metuchen, NJ. For more information please visit, www.thecitizenscampaign.org
