InJersey

Companies with government contracts recently filed their annual contribution disclosure reforms with the New Jersey Election Law Enforcement Commission. The data showed that our state pay-to-play reform law is working, effectively cutting the flow of contributions by 38% since the law went into effect.

It also shows that there is still a need and predictable benefit to expanding the strong state-level pay-to-play law to the local level, where engineering and law firms secure millions of dollars in local government work in return for making huge political contributions.

The Citizens Campaign wrote the laws to eliminate wasteful spending and ensure integrity in government contracting more than 10 years ago, offering citizens a model ordinance to eliminate pay-to-play in municipal contracting. Over the years more than 100 municipalities have banned the wasteful pay-to-play practice, which in turned leveraged state-level reform. Now The Citizens Campaign is empowering citizens to fix another wasteful practice, insurance contracting which is rife with corruption and weak competition, by offering municipalities and school districts a model law to ensure conflict free competition in obtaining “best price” insurance coverage.

Insurance procurement is one realm of government business that has been riddled with corruption. In just the past year more than 30 municipalities and school districts insurance records have been subpoenaed by the FBI. Perth Amboy and Toms River School Districts were victims in a corrupt insurance scheme that robbed their School Districts of millions of dollars.

This is troubling considering our boards of education as well as our municipalities are operating under very strict fiscal constraints, doing their best to ensure the quality of education and quality of life our residents deserve. Paying unnecessarily high prices for health benefits plans and other types of insurance and for broker’s fees is the last place where we want to see our tax dollars go.

Under the current practice, many communities designate a “broker of record” to solicit insurance coverage quotes. The broker isn’t hired by the municipality directly, but “chosen” to solicit insurance coverage quotes and make recommendations to the governing body. In this scenario, the broker of record is paid by the insurance company based on a percentage of the overall package, thereby incentivizing the broker to secure the best deal for the insurance company and themselves–not the town.

It’s time we settle into a “new normal” in contracting for insurance coverage. Just as citizens introduced strong pay-to-play reform in professional and no-bid contracts, citizens need to bolster protections in insurance procurement to ensure that our government agencies are getting the best packages at the best rates.

We suggest a paradigm shift in insurance procurement–providing incentives to brokers to work for the towns and school districts and not private insurance companies. To do this, The Citizens Campaign Law and Policy Task Force has written a model law for school board and town government adoption that not only cleans up this system, but has the potential to save millions of dollars.

Our model law is simple—rather than insurance companies paying brokers a commission and fees that inflate the cost of coverage, require broker’s to be hired by the town or school district on a competitive, flat fee basis. Using this approach, Perth Amboy recently saved $261,000 in reduced brokers’ fees, Morristown saved $37,000, and Toms River is estimating saving more than $1 million in reduced broker’s fees.

Second, require towns and school districts to get multiple quotes, including quotes from the State Health Benefits Plan and Joint Insurance Funds (which both remove brokers from the equation). Perth Amboy School District just now projects more than $3 million dollars in savings using The Citizens Campaign’s process. Cherry Hill School District saved $3 million this year in response to a proposal from a Citizens Campaign leader, and expects to save another $3 million next year.

Citizens and public officials at the state level and in many towns have become accustomed to the strict guidelines and safeguards that ensure contracts are awarded on merit and cost-effectiveness. Expansion of pay-to-play controls to all local government bodies and adoption of conflict free competitive insurance purchasing procedures needs to be the cause of citizens concerned with skyrocketing property taxes and shrinking local government services.

The Citizens Campaign is now empowering citizens to propose an effective model ordinance or resolution for best price insurance contracting, in addition to strong pay-to-play regulations in cities and school districts across the state. On April 1st we educated citizens at a Camden Call to Service Summit to begin this movement in South Jersey. More than 300 citizens answered the Call and more local summits are being planned throughout the state. (A special need to immediately adopt Best Price Insurance Contracting reform will present itself in school districts where budgets were rejected by the voters)

Citizens don’t need to be elected officials to get things done. The Citizens Campaign offers free tools and training that empower them to take charge and get real results on issues they care whether it’s cutting government waste or other ideas they have to make our government work better.