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N.J. says Paterson?s health insurance reform helped save city $2.1M

April 14, 2014, 5:06 PM Last updated: Monday, April 14, 2014, 5:06 PM
By JOE MALINCONICO
Paterson Press

PATERSON ? State officials have given their blessing to the city?s new contracts for employee health benefits, crediting a reform measure enacted three years ago for producing more than $2.1 million million in savings.
Paterson City Hall
Paterson City Hall

Paterson eliminated ?inherent conflicts that previously existed? by adopting an ordinance in 2011 that discontinued the practice of allowing health insurance brokers to get commissions based on the size of the benefits? contracts, according to the state.

Paterson was one of the first municipalities in the state to adopt an ordinance switching to flat fees for insurance brokers, said Thomas Neff, the director of the New Jersey Division of Local Government Services, in an April 10 letter to city officials.

?Old broker agreements that had existed for many years allowed for secretive and undisclosed commissions worth hundreds of thousands of dollars annually ? payments that perversely grew for the broker as costs grew,? Neff wrote. ?As the City noted when it reformed its brokerage arrangement, the new paradigm eliminated this conflict.?

'?The proof of the benefit of this new arrangement is in the result,? Neff added, referring to the lower prices.

The 2011 ordinance that set up the new system for hiring insurance brokers was sponsored by Councilmen Andre Sayegh and Julio Tavarez after they learned of the best-prices model from the Metuchen-based Citizens Campaign, a non-profit good government organization. [Editor?s note: The Citizens Campaign also owns Paterson Press.]

?We saw the value this change would bring to our city and began working on it right away by conducting research, community meetings and, of course, providing information to our council colleagues,? Tavarez said in an email.

Tavarez called the broker ordinance ?the piece of paper that is going to save the city $2.1 million.?

Heather Taylor, the Citizens Campaign?s communications director, said state officials have calculated that local governments and school districts throughout the state would save a total of more than $200 million if they enacted the broker reforms and in some instances switched to the State Health Benefits Plan.

"We hope more cities will take note of Paterson's significant savings,? Taylor said. ?Cities across the state are seeing similar results when they use a competitive and transparent process for hiring insurance brokers and selecting health benefits coverage."

The Paterson City Council approved $12 million in new health contracts at its meeting last week. The state last year had strongly suggested Paterson join the state plan to save money. But the cost-analysis conducted by Paterson?s consultants, USI , convinced the state that the city would achieve significant savings on its own.
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Why didn't Jersey City save $2m (maybe more), like Paterson did?

because the city rejected Citizens Campaign's "Best Price" insurance model and to make it worse, instead of designating a broker for the usual one year period, we designated a broker for an unprecedented 3 years.

CITY SPOTLIGHT: PATERSON

In 2010, Jesse McCaskill (pictured left) submitted a proposal to the Paterson City Council to adopt The Citizens Campaign Best Price Insurance model law. Jesse highlighted how this evidence-based best practice had already saved millions of tax dollars in the Cherry Hill and Toms River school districts by simply requiring a more rigorous competitive process for obtaining health benefits and eliminating any conflicts of interest. The City Council & Mayor embraced his proposal, making Paterson the first city to adopt the Best Price Insurance Law. we are leaving budget savings on the table.

Since the law's adoption, our very own award-winning Paterson Press has been on the front lines holding City officials accountable. It was reported that the City saved $2 million this year on health benefits, and the State Department of Community Affairs credited the ordinance we developed for this savings.

This major victory for the people of Paterson would not have been possible if it were not for the outstanding city coverage by Paterson Press. It's no wonder the NJ Chapter of the Society of Professional Journalists have just selected Paterson Press as the 1st place winner for Investigative Reporting. Kudos to its editor, Joe Malinconico, who has made Paterson Press a model for quality online journalism.

Interested in getting involved with our work in Paterson? Contact Heather Taylor at heather@thecitizenscampaign.org.
The Citizens Campaign ? 450 Main St, Metuchen, NJ 08840, United States