Module 5: Health Insurance Transparency & Alternatives

The Biggest Lever: Broker Conflicts, the State Plan, Consortiums, and Direct Primary Care

Impact Potential: Very High - health insurance premiums are the single largest cost driver cited by the board; health benefits for West Orange staff are expected to climb nearly 18% this year; the Perth Amboy precedent shows a single NJ district losing $49M to broker conflicts; statewide Ch.44 reforms have already saved SEHBP employers $462.7M
Effort: Low-Medium - the initial ask is just transparency (broker disclosure); switching plans or renegotiating requires more work but the district’s own administrators handle that
Timeline: Broker disclosure can be requested immediately (and may be legally required); plan evaluation takes months; a switch would likely take effect at the next renewal cycle
Key Risks: The broker has a financial incentive to resist disclosure and discourage switching; the board may have personal relationships with the broker; switching plans mid-year is usually not possible; this is a “big fish” that takes time to land
Print Priority: Very High - this is the strongest dollar-for-dollar argument; even as a “mention” in the speech, it reframes the entire budget conversation

The Problem

Health insurance premium increases are cited as a primary driver of the district’s deficit. Health benefits are expected to climb nearly 18% in the coming year. This is the single largest cost lever available - and a topic unlikely to have been exhaustively examined.

The district is not alone. Budget meltdowns are hitting schools across Essex County and statewide, with health insurance consistently cited as a primary driver.

The GLP-1 Factor

A major accelerant of the current crisis: GLP-1 medications (Ozempic, Wegovy, Mounjaro, Zepbound) have become the top drug category by spend in the NJ state health plans. Employers nationally report ~30% increases in GLP-1 costs with usage higher than expected. Multiple insurers are dropping weight-loss GLP-1 coverage entirely for 2026.

These drugs are genuinely transformative for people with severe obesity, diabetes, and cardiovascular risk. They’re also being prescribed for cosmetic weight loss by people who can afford them out-of-pocket. The insurance system wasn’t built to handle a single drug category that costs $1,000-1,300/month per person suddenly being prescribed at scale.

The fairness question is stark: should the insurance pool - funded by everyone’s premiums - cover GLP-1s for the person who medically needs it to manage diabetes AND the person who wants to lose 15 pounds? Currently both draw from the same pool, and the pool is breaking. A community that could distinguish genuine medical necessity from elective use - and perhaps enable those using it electively to help fund coverage for those who need it medically (the same “sponsor a neighbor” model applied elsewhere in this whitepaper) - would reduce the strain without denying anyone access.

The Perth Amboy Precedent

In January 2026, State Auditor David Kaschak published an audit finding that the Perth Amboy school district missed $49.1 million in potential savings by failing to switch to the NJ State Health Benefits Plan (SHBP/SEHBP) – the state’s largest and least expensive provider, covering 800,000 public employees, retirees, and their dependents.

The audit found Perth Amboy’s health care costs were 18% higher than necessary from fiscal years 2020 through 2024. The district’s broker failed to run a cost comparison from 2020 through 2023. When the district finally ran one in 2024 and found it could save substantially, it was too late to switch for that year.

Worse: the auditors found the broker was secretly receiving back-end sales commissions from insurance companies and prescription drug providers – payments that state law requires to be disclosed. These undisclosed commissions created a perverse incentive to seek more expensive coverage.

A subsequent whistleblower lawsuit alleged retaliation against an employee who raised insurance bidding and pay-to-play concerns.

Perth Amboy has since switched to the state health benefits system.

This is a structural conflict of interest, and it’s not unique to Perth Amboy.

The Statewide Broker Problem

In September 2025, the NJ Office of the State Comptroller published a report on conflicts of interest and procurement violations in local government and school board health insurance funds. Key findings:

The brokerage firm Conner Strong & Buckelew (CSB) and its affiliated entity PERMA improperly controlled multiple health insurance funds, including the School Health Insurance Fund (SHIF)
From FY2021 to FY2025, SHIF paid these entities approximately $36 million with undisclosed conflicts of interest
CSB wrote RFPs, reviewed bids, and steered contracts to itself without adequate competition or disclosure
The full report (PDF) documents how a proposed cooperative pricing system covering 40,000+ municipal employees was tailored to favor existing vendors in violation of procurement law
The Comptroller made referrals to the Department of Banking and Insurance, the Attorney General, and the School Ethics Commission

This is the systemic context. The question is whether our district’s broker arrangement has similar issues. We won’t know until we ask.

Questions Worth Exploring Together

How is our broker compensated? If the answer is “a percentage of the premium,” the broker is paid more when our costs go up. That structure creates a conflict of interest worth examining.
When was the last side-by-side comparison between our current plan and the NJ State Health Benefits Plan? If one hasn’t been done recently, that may be a significant opportunity.
Has the board reviewed the State Comptroller’s 2025 report on health insurance fund conflicts? Does our district participate in any of the funds cited in that report?
What is the total cost of broker services - direct fees, commissions, and any back-end arrangements with carriers?

Alternative Models Worth Evaluating

The current model - a private broker selecting a fully-insured plan from a commercial carrier - is not the only option. Several alternatives have demonstrated savings for school districts in NJ and nationally.

Option A: The NJ State Health Benefits Plan (SEHBP)

The most direct alternative. The SEHBP is the state’s largest health benefits program and benefits from massive pooling and negotiating power.

What’s changed recently: In 2020, NJ passed Chapter 44 health benefits reform legislation, restructuring the plans available under SEHBP. The reform introduced the NJ Educators Health Plan (NJEHP) designed specifically for school employees.

Past savings: State actuaries validated that employers in the SEHBP saved $462.7 million from Ch.44 changes - far surpassing the $300 million target.

The current reality (updated post-meeting): The SEHBP is now itself in crisis. AON has recommended a 29.7% premium increase for plan year 2026, driven by $254 million in cost overruns in 2025 and the explosion of GLP-1 drug costs (Ozempic, Wegovy, Mounjaro). Healthier employer groups are leaving the state plan, concentrating risk among those who stay. At the April 20 board meeting, the district presented evidence that they’ve already explored the state plan and made a switch several years ago that helped avoid even worse outcomes - but the state options themselves are now struggling with double-digit increases.

What this means: The SEHBP may still be better than private alternatives, but “better than terrible” isn’t a solution. The state plan alone won’t save us. This is why the more creative options below matter - we need to address the root cause, not just shop between increasingly expensive middlemen.

Option B: Joint Insurance Funds / Health Insurance Consortiums

NJ law (N.J.S.A. 40A:10-36) allows school boards to jointly create self-insurance funds to pool risk and reduce costs. Several such funds exist:

SHIF (School Health Insurance Fund) - serves member school districts
SNJHIF (Southern NJ Regional Employee Benefits Fund) - 52 local government members, over $70 million annual budget
Various regional municipal employee benefit funds

How consortiums help: When multiple districts pool resources, they gain greater purchasing power, spread risk across a larger population, and can negotiate directly with providers. Claims tend to be lower than in community-rated commercial plans.

The caveat: The State Comptroller’s 2025 report found that some of these funds have their own conflict-of-interest problems. Any consortium arrangement should be evaluated for the same broker transparency issues we’re raising about the current plan.

Option C: Self-Funded Insurance

In a self-funded model, the district acts as its own insurer - paying claims directly rather than paying premiums to a carrier.

Advantages:

Eliminates the carrier’s profit margin and state premium taxes
District retains any surplus (in a fully-insured plan, surplus stays with the carrier)
Greater transparency into actual claims data
Can be paired with stop-loss insurance to cap catastrophic risk

Considerations:

Works best with larger employee populations (several hundred+) where claims are statistically predictable
Requires administrative infrastructure (often outsourced to a Third-Party Administrator)
Carries financial risk if claims spike unexpectedly
A district exploring this should obtain its own claims data history - which the current carrier may be reluctant to share

Who does this: Self-funding is common in larger school districts and municipalities nationally. In NJ, the joint insurance fund model (Option B) is a form of collective self-funding.

Option D: Direct Primary Care (DPC)

Direct Primary Care is a model where an employer contracts directly with a primary care provider for a fixed monthly fee per employee, covering routine primary care visits with no copays, no claims processing, and no insurance middleman.

How it works alongside insurance: DPC doesn’t replace insurance - it supplements it. Employees get a high-deductible health plan (HDHP) for catastrophic/specialist coverage, plus DPC for routine care. Because DPC handles the majority of primary care visits outside the insurance system, claims drop and premiums decrease.

Documented example: Orange County Public Schools in Florida (24,000+ employees, eighth-largest district nationally) implemented an advanced primary care model and reports savings of up to 30% on healthcare costs. Over 17% of the workforce enrolled, with many employees who previously lacked an established primary care physician now receiving regular care.

The concept for our district: What if the district contracted with local independent clinics to provide DPC for staff?

Small practices would value the stability of a guaranteed patient block
The district gets predictable costs and healthier employees
Insurance claims drop, which drives down premiums at renewal
Employees get better access to care with shorter wait times
Local economy benefits from keeping more healthcare dollars local

This is a longer-term initiative that requires feasibility study, but it represents the kind of creative thinking the board should be doing instead of defaulting to “the numbers are what they are.”

Option E: Reference-Based Pricing

Rather than accepting whatever rates an insurance carrier negotiates with hospitals, the district (or its plan administrator) sets reimbursement rates based on a reference point - typically a percentage of Medicare rates (e.g., 150-200% of Medicare).

This is an emerging model in the self-funded space. It can dramatically reduce costs for high-ticket procedures (surgeries, hospital stays) where commercial insurance rates are often 300-500% of Medicare. It requires willingness to navigate balance billing disputes and may not be suitable as a first step, but it’s worth understanding as part of the landscape.

Option F: Community-Scale Dual Plan (Longer-Term Vision)

This is the most ambitious option - a thought experiment that points toward where healthcare could go if we’re willing to rethink the model entirely.

The concept: split routine care from catastrophic coverage.

Layer 1 - Local primary care: The district (or a broader community entity) contracts directly with truly local, independent providers - not chains with a local branch, but independent physicians and small practices rooted in the community. A flat monthly fee covers routine visits, preventive care, basic diagnostics, and common prescriptions. No insurance middleman. No claims processing. No network restrictions. The provider gets guaranteed patient volume and predictable revenue; the community gets accessible, affordable primary care.
Layer 2 - Catastrophic coverage: A high-deductible plan (potentially self-funded with stop-loss protection, or through the state plan) covers hospitalizations, surgery, specialists, and major medical events. Because Layer 1 keeps people healthier and out of the ER, claims on Layer 2 drop, which lowers premiums over time.

Why local and independent matters: A large health system or chain practice has its own overhead, executive compensation, and growth targets. An independent physician’s costs are primarily their own time and supplies. Supporting independent providers also keeps healthcare dollars circulating locally rather than flowing to corporate headquarters elsewhere. Over time, the community can help reduce overhead for these providers too - shared administrative tools, community-maintained scheduling platforms, pooled purchasing of supplies - the same “globalize the knowledge, localize the implementation” approach applied to healthcare infrastructure.

How it interacts with employer insurance: Many residents already have insurance through their employers. A community primary care arrangement would be supplemental - useful for those whose employer plans have high copays for primary care, and essential for those without employer coverage (part-time workers, gig workers, between-jobs residents). Participation would be voluntary.

The tax angle: NJ law allows school districts to exceed the 2% tax levy cap specifically for healthcare cost increases. What if a portion of that increase funded a community primary care arrangement rather than just paying higher premiums to an insurance company? The money goes further because it’s buying care directly rather than buying insurance that buys care. At the end of the year, any surplus returns as a tax credit.

Protecting those who can’t afford it: Not everyone can absorb a tax increase. The community can apply the same “sponsor a neighbor” model used for PTA memberships and school photos: willing residents voluntarily cover the increase for a neighbor who’s struggling. This isn’t charity - it’s community self-insurance in its most literal form.

This option requires significant legal, financial, and organizational work. It’s not a next-month solution. But it represents the direction we should be moving: from paying intermediaries to manage our healthcare, to managing it ourselves with professional medical providers as partners rather than as vendors behind a corporate wall.

See also: The Action Plan for how this fits into the broader three-prong strategy of immediate relief, community process, and long-term cost reduction.

The Scale of Potential Savings

We are not making specific dollar promises. What we are saying:

Perth Amboy’s costs were 18% higher than necessary for four years - a figure remarkably close to our own district’s projected premium increase
Statewide Ch.44 reforms saved SEHBP employers $462.7 million
A single large district (Orange County, FL) reports up to 30% savings from advanced primary care
The State Comptroller found $36 million in undisclosed payments to conflicted vendors in just one set of health insurance funds

The question is not “can we save money on health insurance?” The question is “how much are we leaving on the table, and why hasn’t anyone looked more?”

The Immediate Ask

File the RFI Template B requesting:

Full broker compensation disclosure - direct fees, commissions, and any back-end arrangements with carriers
Documentation of any SEHBP feasibility study or cost comparison
Confirmation of whether the broker’s pay structure creates a conflict of interest
The district’s claims history data (needed to evaluate self-funding or consortium options)

There are further support options to acquire this and similar information if needed.

References

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