“I’d like to discuss insurance with you….”
That’s a statement that can induce narcolepsy in an otherwise healthy individual, and perhaps a reason why the subject of insurance costs for municipal bodies is not a hot topic of conversation.
The spring of 2013 brings a political controversy in Bergen County that may provide an opportunity for the larger issue of insurance costs to be discussed – and simultaneously provide the political drama that often captures people’s attention.
According to the Bergen Record, “…former Oakland Councilman Matt Kazmierczak, alleged that Alan C. Marcus, who ran Kathleen Donovan’s successful 2010 campaign for county executive, used “unreasonable, inappropriate and illegal pressure,” to get the county to change health insurance brokers.”
The motivating issue is the loss of $136,000 in commissions – the subject of Comptroller Boxer’s report released in February of 2012 detailing how commission-driven brokers hired by municipalities dramatically increase the cost to taxpayer in comparison to the state insurance pool.
Insurance, for municipalities and school boards, is a significant percentage of their budgets. Even for a relatively small town in New Jersey, insurance costs will consume millions of dollars. The Comptroller report inspired an article in NJSpotLight.com which offered a deeper analysis of NJ’s municipal insurance industry and how it overlaps into the political arena.
But the recent Record article, where Kazmierczak and Bergen County Administrator Ed Trawinski trade barbs, might offer enough personal drama to spark a larger interest in how insurance costs unnecessarily drain municipal and school budgets.
Kazmierczak alleges that his wife had a disagreement with Alan Marcus, and this was the motivating factor in the firm he was associated with losing the contract. The details of the disagreement have not been disclosed, but the hint of it lends for a more interesting story.
The allegations also bring together two big names in New Jersey politics, Alan Marcus from the north of Jersey, and George Norcross from the south.
Marcus is regularly in the press, most recently concerning a contract his firm had with Bergen Community College. He is considered a confidant of County Executive Donovan, as well as Bergen Record publisher Stephen Borg.
The State Comptroller report in 2012 compared potential savings municipalities could realize by moving into the state pool insurance; but, the Citizens Campaign offers another avenue on how taxpayers might achieve a better price when shopping for insurance – it’s a model ordinance called Best Price Insurance Contracting.
The model ordinances, one for municipalities and one for school boards, have already saved towns in NJ millions of dollars. The ordinances, passed by local governments, raise the standards by which they will seek to contract for insurance services.
Competitive bidding becomes intrinsic to the process, and the ordinance closes the loopholes that allow for what is known as the “unfair and open process”.
But the core piece of the ordinance is focused on prohibiting commissions. This is the integral part that eliminates financial incentives from third parties. The model ordinance calls for insurance consultants to be paid only by the municipality for brokering a deal, and not receive any compensation from the other party.
Insurance consultants are hired to seek opportunities and negotiate deals on behalf of a municipality or school board; when they are receiving additional commission fees from the other party – it leaves open as to whether they are representing their own financial interests, the interests of the insurance company, or the interest of their municipal client.
The Citizen Campaign ordinance seeks to remove that doubt – there are no hidden incentives that may taint the process. The ordinance can be read in its entirety by clicking here, and below is the one paragraph that could significantly change how NJ towns cover their rising insurance costs.
“WHEREAS, the governing body of (MUNICIPALITY) finds that requiring its insurance consultants be compensated solely by (MUNICIPALITY) and not by commissions or fees, direct or indirect, paid by insurance carriers or other organizations providing insurance alternatives, and prohibiting any third party from paying any commission or fee to such consultants for securing business with (MUNICIPALITY), will ensure the fidelity and loyalty of such consultants to (MUNICIPALITY), and eliminate or reduce conflicting loyalties such consultants might otherwise have to any third parties;”
Oakland has recently approved a new Pay-to_Play ordinance. What is preventing our town council from approving this new, no kick-backs ordinance? Seems to me these royalties and fees would feel better in my own pocket instead of the third party schnook’s. .