Tony Kurdzuk/The Star-Ledger

Tom Considine, the former commissioner of the Department of Bankingand Insurance and now chief operating officer of MagnaCare, hasraised questions about a recent state comptroller report that said NewJersey local governments collectively could save millions of dollars byjoining the state health benefit plan.

Ex-insurance commissioner questions claims that N.J. townswould save millions in state health benefit planPublished: Sunday, April 08, 2012, 8:30 AM

By

Ed Beeson/The Star-Ledger

A recent report from the Office of the

State Comptroller that said local

governments could save millions of dollars

if they joined the state health benefits

program was met with some skepticism by

three of the four municipal entities it

studied. Now the former commissioner of

the Department of Banking and Insurance,

which assisted in making the report, has

called the independent watchdog’s findings

overly rosy.

“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 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.

Considine, who left the banking and insurance department in February, said in an interview that while “we

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TONY KURDZUK/THE STAR-LEDGER

State Comptroller Matthew Boxer

applaud” the comptroller for examining ways in which municipalities can save on their health care costs,

joining the state’s benefit plan is not feasible, or even appropriate, for many municipalities.

He also questioned the projection that $100 million could be saved from a collective switch to the state’s

insurance plan. A study of only four municipalities is not statistically significant, he said. “It can be

representative: here are four anecdotal studies we made,” he said. “What it can’t be used for is

extrapolation, and projected out to every member of the state.”

Considine is not the first to speak critically of the comptroller report, though as a former administration

official, his remarks are unusual. While the report was well-received in some circles, insurance brokers that

stand to lose valuable commissions from towns jumping to the state’s roster faulted its criticism of their role

as middlemen. Three of the four municipal entities studied by the comptroller also expressed disagreement

with some of Boxer’s conclusions, according to their written responses contained in his report.

A spokesman for the comptroller’s office

said the $100 million cost-savings

projections actually were conservative, in

that the estimates did not factor in

hundreds of school districts. He also said

the report was not intended to push public

employees toward the state benefit plan,

but to raise it as an option that local

entities should consider on a cost/benefit

basis. “Our audit found that currently

some local governments are not doing

that,” the spokesman, Pete McAleer, said.

Since the comptroller’s report was issued,

10 local government entities have joined

the state benefit plan, according to state

data McAleer provided. These include Plainsboro, the Millburn Board of Education, Florham Park and

Gloucester County.

As for MagnaCare’s criticisms, McAleer said, “This isn’t the first vendor trying to use one of our reports to

drum up more business for itself. The findings of our audit speak for themselves.”

MagnaCare currently does not do much public sector work in New Jersey, but is looking to increase its role in

the sector, Considine said.

One steep hurdle local governments face in switching to the state health plan is getting approval for the

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move from local unions, a process that is oversimplified in the comptroller report, Considine said.

The comptroller’s report acknowledges that many entities would not be able to make a switch until their

current collective bargaining agreements expire. But it does not offer comment on the fact that local unions

have sued over a switch to the state plan or price increases. Millville, for example, said four local labor

unions accused it of unfair labor practices over what the city called “minor differences” between the state

plan and the private insurance they previously had. The report does not say whether the Millville matter was

resolved, but Essex County, one of the government entities Boxer said would have benefited from being a

part of the state plan, noted in its response to the comptroller that an arbitrator overruled the county’s

attempt to increase co-pays for prescription drugs.

The Department of Banking and Insurance’s role in producing Boxer’s report largely was to confirm that

insuring larger groups of employees is less expensive than insuring smaller groups because it spreads the

cost of brokers, consultants and other administrative costs across a larger pool, Boxer wrote. Three of the

entities that his report studied together spent more than $1 million combined on brokers over a two-year

period, he wrote.

Considine took issue with the notion that broker fees were simply an expense that local governments should

look to eliminate. “For many towns, health care is their second-largest expense,” he said, adding that

governments need expert advice in the area just as they need engineers and legal counsel for other matters.

But one piece of advice that local governments may not hear from their broker, Boxer found, is that they

should consider the state benefit plan. Twenty-seven of 116 local government units surveyed by the

comptroller said their broker did not offer up the state plan as a health insurance option, Boxer said.

Ed Beeson: (973) 392-4262, ebeeson@starledger.com

© 2012 NJ.com. All rights reserved.

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