Acting State Comptroller Kevin Walsh blocked procurement proposals by two joint insurance funds after finding longstanding undisclosed conflicts of interest and other contracting law violations. (Dana DiFilippo | New Jersey Monitor)
The state comptroller said Tuesday that he found a bevy of violations at three public joint insurance funds that include the steering of contracts to favored and politically connected vendors, contracting law infractions and conflicts of interest that went undisclosed for years.
In a new report, acting Comptroller Kevin Walsh said an investigation launched by his office suggests a single private firm — insurance company Conner Strong & Buckelew — had effectively gained control of New Jersey’s public insurance pools.
Conner Strong, one of the nation’s largest insurance firms, was founded by South Jersey Democratic power broker George Norcross, who left the firm last year after he was indicted on unrelated racketeering charges later thrown out by a Superior Court judge.
Walsh claims that Conner Strong and a related entity operating under the name PERMA for years failed to tell regulators or the joint insurance funds that they are legally and practically a single business. Walsh’s report says Conner Strong and PERMA’s employees overlap, the two companies share leadership, and in many cases, they write rules for how a contract will be awarded — then compete for and win that same contract.
“This consolidation of control by a vendor happened without adequate disclosure, competition or accountability,” the report says. “The result is an unauthorized covert takeover of a core public function by a private entity — and a serious risk to public trust and public dollars.”
Walsh blocked procurements proposed by two of the joint insurance funds as a result of his findings.
Dan Fee, a spokesperson for Norcross, said Norcross has not returned to Conner Strong since his departure last year. Fee challenged the veracity of the comptroller’s report, likening it to Attorney General Matt Platkin’s now-dismissed indictment of Norcross (Platkin is appealing the dismissal).
“Like Matt Platkin’s case against Norcross and his allies in rebuilding Camden — a case which was quickly dismissed by the courts — today’s Comptroller report is rife with factual inaccuracies and evinces a fundamental lack of understanding of the issues,” he said.
Fee’s statement did not identify the inaccuracies.
Past reviews by regulators at the Department of Banking and Insurance and the Department of Community Affairs and a previous comptroller had found the health insurance funds to be in compliance with state law and regulation, Fee said.
Walsh’s report says the lack of notice to regulators about the nature of PERMA and Conner Strong’s relationship “explains why no concerns were raised by regulators.”
Clear conflict?
Joint insurance funds are a statutory purchasing mechanism for local government units like municipalities, counties and school boards. Individual government units pool their workers to dilute risk and to secure health and other insurance products at lower prices than they could individually.
Some joint insurance funds have seen enrollment spike as municipalities flee the local government part of the State Health Benefits Program, which faces a death spiral due to years of soaring premiums driving governments off the system and sending premiums yet higher, spurring more departures.
Walsh’s review found PERMA’s executive director operated as the administrator for three joint insurance funds — the Southern New Jersey Regional Employee Benefits Fund, the Schools Health Insurance Fund, and the Municipal Reinsurance Health Insurance Fund — for which Conner Strong was a program manager.
State regulations bar joint insurance fund administrators, who manage day-to-day operations, from simultaneously serving as program managers, who provide actuarial and other professional services.
Procurements issued by the Southern New Jersey Regional Employee Benefits Fund in May and June of 2024 were designed to exclude other vendors, the comptroller said. The fund provides benefits to more than 9,500 enrollees across 40 local government units in South Jersey.
Those requests for proposals, which sought carriers to act as third-party administrators, were initially submitted under standards that are disallowed for cooperative purchasing, which requires solicitations award the lowest responsible bidder, the report says.
The solicitations were drawn to benefit existing vendors by requiring that bids include equivalents for roughly 100 health plan designs, the comptroller said. They allowed bidders to submit equivalent offerings but did not provide technical or other data that bidders would need to demonstrate equivalency, he said.
“Essentially, the specification was so narrowly tailored that it was designed specifically for the incumbent vendor,” the comptroller’s report says.
The procurements’ structure would have afforded PERMA and Conner Strong sole control over procurement for six joint insurance funds covering nearly 300 government entities and covering just under 110,000 individuals, the report says.
Walsh’s office found similar issues in a June 2024 solicitation issued by the Schools Health Insurance Fund when it was seeking a program manager. The report says PERMA’s executive director oversaw prior procurements for the fund that awarded Conner Strong a program manager contract despite the executive director being a Conner Strong employee.
The executive director’s financial disclosure listed Conner Strong as an employer and source of income, but did not mention PERMA. The executive director, whom the report does not name, told the comptroller’s office that Conner Strong management, a likely bidder, reviewed the school insurance fund’s solicitation before it was submitted to the comptroller’s office for review (state law requires the comptroller to review procurement proposals where the worth of a contract is expected to exceed certain dollar amounts, which vary year-to-year).
“This process, which is legally required to be fair, objective, and focused on protecting taxpayer funds, was instead managed by CSB, the incumbent vendor, which reviewed its own proposals and interpreted the procurement rules, ultimately compromising the integrity of the process through bias,” the comptroller’s report says. “Conflicts of interest do not get any clearer than this.”
Joseph DiBella, who oversees Conner Strong’s marketing department, did not return requests for comment sent to his email addresses at Conner Strong and PERMA.
The Schools Health Insurance Fund denied a conflict of interest in correspondence to the comptroller. The comptroller’s office took that as a suggestion that the fund intended to award the new contract to Conner Strong and denied the procurement proposal.
Walsh’s office also raised concerns about the legality of the Municipal Reinsurance Health Insurance Fund, noting its members — other joint insurance funds — are not local or contracting units permitted to create joint insurance funds under state law.
Regulators should review the municipal reinsurance fund’s role in Hi Fund, a marketing brand for PERMA and Conner Strong that falsely claimed it acted as a health insurance pool and used officials’ likenesses in advertising online and at the New Jersey League of Municipalities annual conference, apparently without their knowledge, Walsh said.
Walsh’s report calls Hi Fund “a front used to generate business” for Conner Strong. After an interview with the comptroller’s office, Hi Fund added a disclaimer to its web pages noting it is only a branding name and not a company, the report says.
Hi Fund’s logo appeared on procurement documents submitted by the Southern New Jersey fund, and neither PERMA’s executive director nor the municipal reinsurance fund’s qualified purchasing agent could explain why, the comptroller’s report says
“Notably, there are no indications that the financial interests and potential conflicts of interest resulting from PERMA/CSB’s and CSB’s creation of the Hi Fund have been disclosed to DOBI or HIF trustees,” Walsh said.
The comptroller’s office directed the insurance funds to submit corrective plans detailing how they will eliminate conflicts of interest, enforce the prohibition barring program managers and administrators from the same firm, and detail how they will secure insurance-related services in compliance with procurement laws. It suggested legislators boost oversight of joint insurance funds.
The office referred its findings to the Departments of Banking and Insurance and Community Affairs, the School Ethics Commission, and the Division of Consumer Affairs.
Fee’s response to Tuesday’s report notes that Walsh will likely be out as the state’s comptroller when a new governor takes office in January.
“This new report should be seen for what it is: an investigation conducted by a politically motivated Acting-Comptroller for his own self-promotion on his way out the door,” Fee said.
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