Audit finds NJ city overpaying for health benefits, sick leave
TRENTON – Brigantine could have saved $191,000 last year by participating in a state health care program, and its pension plan for lifeguards faces a $4.5 million deficit, according to an audit by the state comptroller.
The costs of health benefits are a big political topic currently, as counties and municipalities using the state’s plan, rather than a private insurer, are facing big cost increases in 2023.
But the comptroller found that Brigantine has been spending more than necessary by using a private insurer, as recommended to it by an insurance broker who didn’t accurately calculate State Health Benefits Program (SHBP) costs and bundling discounts.
For example, the broker’s analysis used rates for medical and prescription coverage purchased separately at full cost. When the comptroller’s office applied the discount that is available, the difference was more than $85,000.
The audit concluded that the city could have saved $116,000 last year if it used the SHBP’s Direct 10 plan. Had the city renegotiated a contract with one of its employee unions, it could have gone with the SHBP Direct 15 plan and saved $191,000.
The city spent $2.4 million on health benefits in 2021.
“Our office has previously identified the use of insurance brokers as a source of risk. Brokers often have a built-in conflict of interest,” Walsh said. “What’s good for the broker may not be good for the taxpayers.”
The audit estimates the broker’s fees averaged about $62,000 annually from 2019 through 2021. Insurance brokers do not get a commission when a local government participates in a state health plan.
The comptroller’s office recommends that municipalities pay a flat fee to brokers so they aren’t incentivized to favor a more expensive plan.
City Manager James Bennett, in the city’s formal response to the audit, said Brigantine has requested that its broker provide backup documentation, such as quotes, for the cost analysis it presented.
“While the city acknowledges that per your analysis there may have been potential savings by utilizing the SHBP, we have reason to believe that potential dividends from the current (health insurance fund) were not considered in the calculation,” Bennett wrote.
“While the numbers produce a calculated result, they are not the only criteria in the decision-making process,” he wrote. “We also believe that any potential savings are offset by the difference in the plan performance.”
A bunch of other issues were also flagged by auditors:
🚩 Payments of about $64,000 for health benefit waivers to employees who were receiving coverage through a spouse or family member employed by Brigantine. Workers who waive their coverage may receive 25% of the savings, capped at $5,000.
🚩 The pension plan for lifeguards hasn’t been properly funded and has a $4.5 billion unfunded liability. The city’s 2021 contribution was $20,000 but will need to increase to $358,000 a year for the next 19 years to close the gap.
🚩 Sick leave isn’t being documented as required by city policy, and auditors found $57,000 in potential waste – including one worker who didn’t have a doctor’s note for 97 of 127 sick days used leading up to retirement. The city made $10,900 in improper payments because it didn’t run the math correctly on the earned leave time of retirees.
🚩 The chief financial officer’s contract has a provision making her eligible for 2,080 hours of unused sick time at retirement to the extent permissible by law – without noting the law caps it at $15,000. The city says this has already been addressed.
🚩 The superintendent of public works supervises his brother, including the approval of overtime pay, in violation of the city’s anti-nepotism policy.
🚩 "Comp" time is being allowed to be carried over from one year into the next by exempt employees or those covered by a collective bargaining agreement that prohibits the practice.
Brigantine is an island municipality in Atlantic County with around 7,700 residents and a municipal workforce of about 137 full-time employees and 151 part-time workers.
Its budget is nearly $33 million. Its municipal property tax levy is around $22 million, and its combined tax levy including county and school taxes is around $58 million.