Pennsauken Public Schools could have saved $1.6 million by participating in the State’s health care plan, OSC audit finds

District relied on insurance broker’s analysis which underestimated the cost of a private plan

– Pennsauken Public Schools could have saved taxpayers $1.6 million by participating in the School Employees’ Health Benefits Program rather than purchasing a private health insurance plan in Fiscal Years 2014-2015, finds an audit released today by the Office of the State Comptroller (OSC).

Pennsauken’s health insurance broker performed an erroneous analysis that compared two plans with disparate insurance coverage, OSC found. In addition, the cost of the broker’s commission was not reported to the District as state law requires and was not considered in the cost analysis.

OSC’s audit also found that the contracts for the health insurance broker and health insurance carrier were not awarded in compliance with state laws and regulations. OSC’s examination of the contract found that the broker was entitled to a larger commission or separate bonus from Pennsauken if employee enrollment increased by 25 percent or more. It also allowed the broker to earn “incentives, bonuses, trips, and prizes” from the insurance provider, which could have incentivized the broker to recommend more expensive plans to Pennsauken.

 “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,” said Yvonne Tierney, Director of the Audit Division at the Office of the State Comptroller. “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.”

OSC’s audit also identified issues with regard to Pennsauken’s oversight of its operations including:

  • Failing to comply with state purchasing laws and regulations;
  • Improperly paying $21,300 in health benefit opt-out waiver payments to employees who were receiving health care coverage through the District;
  • Paying stipends to employees who perform extracurricular duties like coaching or serving as a student club advisor without evidence that the work was performed;
  • Failing to comply with federal regulations regarding the school lunch program; and
  • Inadequate controls over its monitoring of food supplies inventory and proper use and reporting of fuel.

Acting State Comptroller Kevin D. Walsh was recused from this audit.

To report government fraud, waste, mismanagement or corruption, file a complaint with OSC or call 1-855-OSC-TIPS.

The Office of the State Comptroller (OSC) is an independent State agency that works to make government in New Jersey more efficient, transparent and accountable. OSC is tasked with examining all aspects of government expenditures, conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in Medicaid.

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