County disputes health savings claim

UNION COUNTY — Freeholder Daniel Sullivan flatly disputed claims made in LocalSource last week that the county could have saved $5.8 million in health benefit costs by going with the State Health Benefits Plan.

At last week’s freeholder board meeting the topic of LocalSource’s article on the county insurance broker steering the board toward a more expensive plan was addressed by Sullivan as well as the broker.

Reading from a prepared statement, Sullivan said three claims by local CWA union representative and county Welfare fraud investigator Jeff Robinson were incorrect.

Sullivan explained the county looked at the state plan every year as an option, and also said union representatives did not tell them they preferred going with the state plan. As for the Horizon contract, the freeholder did not deny union representatives had not been able to get a copy of the horizon contract, but pointed out “the full contracts will be provided once they have been executed.”

Although Sullivan disputed these particular issues, he did not take issue with any other information in the article, nor did he provide an explanation for why the cost comparison of health benefit plans looked at by insurance broker Brown & Brown appeared misleading.

Robinson made allegations that Brown & Brown went along with the recommendation of switching from Cigna to Horizon, and not going with the SHBP, because they did not want to lose an $800,000 commission.

Although the county contracted with Brown & Brown to be their health benefits broker, they did not have to pay for their services. Insurance brokers are paid a commission by insurance carriers directly in these types of situations. However, unlike private health benefit companies, the state plan does not provide commissions under any circumstances. Robinson claimed Brown & Brown steered away from the SHBP because there would not be an $800,000 commission for their work.

“They were supposed to see if there was a better deal out there than Cigna, but instead of coming back with the state plan, which was the lowest cost plan, their recommendation was Horizon,” Robinson said in a LocalSource article last week.

Union County Communications Director Sebastian D’Elia explained Monday that the lowest cost health benefit plan is not always the best plan because the benefits have to be “equal to or better than” the plan they have presently, as stated in union contracts.
“We have 22 unions to negotiate with and health benefits are a big part of these contracts,” he said.
D’Elia also noted that the confusion over the “lag agreement” is easily explained.

He explained this agreement was presented by Horizon as an incentive to switch health benefit plans from Cigna. It was, he said, a way for the county to delay paying Cigna $7.7 million in “runout costs” they would be obligated to pay if they switched health benefit plans to another carrier.

Runout costs, or liability, are outstanding insurance claims that do not come in until after a company switches to another health benefits carrier. These costs or insurance claims that come in after switching carriers, D’Elia said, have to be paid prior to switching to another plan.

In an effort to help the county avoid the major financial burden of handing over $7.7 million to Cigna, D’Elia said, Horizon offered to let the county take the first two premiums they would normally pay to Horizon and use it to pay Cigna the $7.7 million run off liability charge.

Horizon then drafted a “premium lag agreement” with the county, stipulating that these first two premiums could be paid back over 24 months at zero percent interest.

However, the county did not explain where in the final numbers this was accounted for, or if it was conclusively reflected in Horizon’s bottom line number of $47,854,438.57. While neither D’Elia nor county Department of Administrative Services Director Matt DiRado, who actually negotiates with the 22 county union representatives, would comment further, another county employee with knowledge about the health benefit bruhaha explained his take on the matter.

“Regardless whether the SHBP was $5.8 million less or not, the county has never had them as a carrier in the past because the benefits are not ‘equal to or better than’ those in the private sector. That matters more than you think. This is not about which plan is cheaper. This is about 22 unions agreeing to switch to a plan where their direct benefits will not be as good in some areas,” said the employee who preferred his name not be used.

“The unions and retiree’s would never agree to move to the SHBP,” said the county official, pointing out, for example, that employees would lose certain benefits that are important to them; benefits that are limited by the SHBP.

For example, the SHBP limits the number of chiropractic visits to 30, while private plans are far more lenient when it comes to these visits, he said.

At the freeholder meeting Sullivan explained how complicated things can get when trying to find the best health benefits plan for all employees, including the 22 union members.

“Even if one union refuses to make concessions in their benefits, we would have to hire a third party administrator for that union to cover the gap in benefits caused by moving to the state plan,” the freeholder said, adding “to date no union has agreed to that concession.”
Sullivan also pointed out that if the 22 unions agreed to allow the county to create a plan duplicating the SHBP, “that plan would cost 2.5 percent less than the current state plan.”

The freeholder said the county continues to “aggressively negotiate healthcare concessions with our unions to save money.”
“We were the first — even before the state of New Jersey — to require our employees pay more toward their insurance,” Sullivan said, adding “the county does not conduct its negotiations in public and a public meeting was not the proper forum for a discussion of this matter.”

“If any of our unions — including the CWA — are willing to accept the requisite concessions in the health benefits as the state health benefits plan would necessitate, the county would be more than open and eager to negotiate,” he said.