N.J. audit slams Norcross-headed insurance broker for school contract
Norcross spokesman calls report ‘reckless and factually inaccurate’
(Courtesy of the Office of the State Comptroller)
The insurance brokerage helmed by Democratic power broker George Norcross erred in its analysis of health insurance plans for Pennsauken Public Schools employees, costing the district $1.6 million in potential savings, according to an audit released Friday by the New Jersey State Comptroller’s Office.
The 4,700-student school district in Camden County relied on an analysis done by Conner Strong & Buckelew — where Norcross is executive chair — in choosing an insurance company for its employees in fiscal years 2014 and 2015, according to the report.
But the firm underestimated the cost of a private plan and compared two plans with disparate insurance coverage in its analysis, investigators said. The firm also didn’t report its commission to the district as required by law, nor factor its commission into the cost analysis, the audit states.
Enrolling in the state’s health care plan would have been $1.6 million cheaper for the district, investigators determined. The district, located in Camden County, had about 850 staff during the time period auditors examined.
The audit doesn’t identify the private insurer selected. Pennsauken Superintendent Ronnie Tarchichi didn’t return a request for comment.
Auditors also found Conner Strong failed to disclose to the district opportunities for it to score incentives and bonuses, the audit found.
Specifically, under its contract with Pennsauken schools, the firm would score a larger commission or bonus from Pennsauken if employee enrollment in the benefits plan rose by at least 25%. It also could earn “incentives, bonuses, trips, and prizes” from the insurance provider, the report noted. That’s problematic, because such provisions could entice health insurance brokers to recommend more expensive plans, auditors warned.
“A state regulation requires brokers to fully disclose any commission or other incentive they receive. Full transparency of any hidden costs associated with procuring insurance is essential to protecting the interests of taxpayers,” Yvonne Tierney, director of the comptroller office’s audit division, said in a statement. “All school districts should do their due diligence and not rely solely on the advice of brokers who might have a financial interest in recommending a costly insurance plan.”
A Conner Strong spokesman called the report “reckless and factually inaccurate.”
“To move into the State Health Benefits Plan, the Pennsauken Public Schools District had to obtain the consent of its unions. The unions’ collective bargaining agreements required then, and now, that any change provide benefits ‘equal to or better than’ the existing benefits,” spokesman Daniel Fee said. “There was no agreement by the unions to move to the State Health Benefits Plan despite Conner Strong’s recommendation.”
Fee said Conner Strong provided the documentation required by law and informed district officials of their compensation in consultancy agreements — and that their fee was independent of insurers’ charges.
“Had the Comptroller made any request for the documents or if Conner Strong had been asked to participate in the audit or respond prior to its issuance, Conner Strong would have provided them before the Controller issued a recklessly inaccurate report,” Fee said.
Auditors also rebuked Pennsauken for insufficient oversight of its overall operations including:
- Improperly paying employees $95,000 in health benefit opt-out waivers, stipends, and unused accrued leave
- Paying stipends to employees who performed extracurricular duties like coaching or advising student clubs without proof the work was done
- Failing to verify the income of applicants for free or reduced price school lunches or follow other documentation processes
- Having inadequate controls over food and fuel
The audit notes district administrators have taken steps to fix problems auditors uncovered.
Acting State Comptroller Kevin D. Walsh recused himself from the audit, because he lives in the area.
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