As reported by nj.com, local governments could save more than $100 million annually by opting for the state health benefit plan instead of costlier alternatives, according to a State Comptroller’s Office report released Tuesday. The audit looked at four local governments of varying locations and sizes, Essex County, Brick Township, East Brunswick, and Haddon Township, and found that joining the State’s plan would have saved them collectively $12.5 million over a two year period starting in 2009.
Three of the local governments hired insurance brokers to assist them in securing coverage from insurance carriers and collectively paid more than $1 million in broker fees over a two-year period. Insurance brokers receive hefty commissions when they secure private insurance, but no money if the local government joins the state health plan. Thus, there is no financial incentive for brokers to select the state health plan and local governments don’t do enough to evaluate the costs and benefits themselves, the report said.
State Comptroller Matthew Boxer said, “Health coverage for public employees is an area in which substantial savings can be realized for taxpayers. Too many public entities in New Jersey are not taking basic steps to ensure that they are getting the best deal.”
The New Jersey Health Benefits plan was established in 1961 to provide health insurance coverage to all state employees, retirees, and their dependents. In 1964, it was expanded to all public employees in the state. It provided coverage for about 850,000 participants, the report said. As of April 2011, seven of the state’s 21 counties and 349 of the state’s 566 municipalities participated in the state plan.
Local government officials noted that switching into the state health plan is not easy because of existing union contracts. Often, union contracts have certain provisions like limits on co-pays and coverage that differ with the state plan. “Due to the number of collective bargaining agreements, 26 in total, all recommended changes to employee health benefits must be negotiated at the expiration of each agreement,” Essex County Administrator Ralph Ciallella said in a written response to the report’s findings. “Wholesale changes to employee health benefits must be negotiated at the expiration of each agreement.”
Hetty Rosenstein, state director for the Communications Workers of America, said the audit confirms what they have known for years. “The more cities and towns join the plan, the more taxpayers can save,” she said in a written statement. “And the more efficient our healthcare system becomes.”