STATE OF NEW JERSEY
217th LEGISLATURE
PRE-FILED FOR INTRODUCTION IN THE 2016 SESSION
Sponsored by:
Senator SHIRLEY K. TURNER
District 15 (Hunterdon and Mercer)
SYNOPSIS
Requires certain public contracts for insurance coverage and consulting services to be awarded through competitive contracting process.
CURRENT VERSION OF TEXT
Introduced Pending Technical Review by Legislative Counsel.
An Act requiring competitive contracting for certain insurance public contracts and supplementing P.L.1999, c.440 (C.40A:11-4.1 et al.).
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. a. A board of education seeking to procure any insurance products or insurance consultant services shall use the competitive contracting process set forth in sections 45 through 49 of P.L.1999, c.440 (C.18A:18A-4.1 et seq.) and shall comply with the additional requirements of this section.
b. An insurance consultant providing any insurance consultant services to a board of education shall be compensated directly and exclusively by the board of education at a fixed amount, an hourly rate, or on another common and readily comparable basis, provided that the compensation shall not be determined as a percentage of any insurance product costs. No insurer shall pay an insurance consultant any commission or other form of compensation for any insurance consultant services provided in connection with any contract awarded to an insurer by a board of education.
c. (1) (a) An insurance consultant seeking a contract for the provision of any insurance consultant services to a board of education shall, in the competitive contracting proposal, certify that no commission or other form of compensation will be accepted from an insurer for any insurance consultant services provided in connection with any contract awarded to the insurer by the board of education.
(b) An insurance consultant awarded a contract for the provision of any insurance consultant services to a board of education shall, as soon as practicable after being awarded a contract, but no later than the date on which an insurer is recommended to the board of education, disclose in a statement to the board of education the aggregate amount of commissions or other forms of compensation received in each of the preceding three years from each insurer that submits a proposal.
(c) An insurance consultant awarded a contract for the provision of any insurance consultant services to a board of education shall, no later than the last business day of each year of the contract, certify to the board of education that no commission or other form of compensation has been accepted from an insurer for any insurance consultant services provided in connection with any contract awarded to the insurer by the board of education.
(2) (a) An insurer seeking a contract for the provision of any insurance products to a board of education shall, in the competitive contracting proposal, certify that no commission or other form of compensation shall be paid to an insurance consultant for any insurance consultant services provided in connection with any contract awarded to the insurer by the board of education.
(b) An insurer awarded a contract for the provision of any insurance products to a board of education shall, no later than the last business day of each year of the contract, certify to the board of education that no commission or other form of compensation has been paid to the insurance consultant for any insurance consultant services provided in connection with any contract awarded to the insurer by the board of education.
d. Upon a violation of any provision of subsections b. or c. of this section by an insurance consultant or insurer, the board of education shall be entitled to terminate any contract with the insurance consultant or insurer and to recover in a civil action the amount of any commission or other form of compensation paid in violation of subsection b. of this section.
e. (1) The request for proposal documentation shall include: the compensation restrictions set forth in subsection b. of this section; the manner of compensation; the certification and disclosure requirements set forth in subsection c. of this section; the penalties for violations set forth in subsection d. of this section; the terms, coverages, and costs of current insurance products or insurance consultant services; the loss experience; and the anticipated insurance product or insurance consultant service needs.
(2) The request for proposal documentation shall be made available to proposers in electronic format.
f. (1) The notice of the availability of request for proposal documentation shall be published in an official newspaper of the board of education, a newspaper of general circulation in at least five counties of this State, and on the board of education’s Internet website at least 60, but no more than 120, days prior to the date anticipated for the commencement of the contract.
(2) The request for proposal documentation shall be submitted to at least one joint insurance fund, established pursuant to P.L.1983, c.372 (C.40A:10-36 et seq.), at the same time the notice of the availability of the documentation is published to determine if it would be advantageous for the board of education to become a member of the joint insurance fund.
(3) Each interested insurer or insurance consultant shall submit a proposal to the board of education at least 30 days prior to the date anticipated for the commencement of the contract.
(4) The purchasing agent or counsel or school business administrator shall obtain at least three proposals.
(5) The report prepared by the purchasing agent or counsel or school business administrator evaluating and recommending the award of a contract or contracts shall include an analysis and discussion of the availability, terms, and price of comparable coverage through participation in at least one joint insurance fund and, with respect to health insurance, the School Employees’ Health Benefits Program.
g. As used in this section:
“Insurance” means any lines of insurance in subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes that are commonly available in a competitive market, including but not limited to life, health, annuities, indemnity, property and casualty, fidelity, surety, guaranty, and title insurance.
“Insurance consultant” means an individual or a business entity providing, for a commission, brokerage fee, or other consideration, services, including but not limited to brokerage, risk management, and related administrative services associated with the procurement, evaluation, and advice, counsel, or opinion with respect to the benefits, advantages, or disadvantages of any insurance product or contract that is or could be issued to a board of education.
“Insurer” means a business entity authorized to transact the business of insurance in this State pursuant to subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes.
“Other forms of compensation” includes but is not limited to incentive payments, bonuses, rebates, or any other thing of value.
2. a. A contracting unit seeking to procure any insurance products or insurance consultant services shall use the competitive contracting process set forth in sections 1 through 5 of P.L.1999, c.440 (C.40A:11-4.1 et seq.) and shall comply with the additional requirements of this section.
b. An insurance consultant providing any insurance consultant services to a contracting unit shall be compensated directly and exclusively by the contracting unit at a fixed amount, an hourly rate, or on another common and readily comparable basis, provided that the compensation shall not be determined as a percentage of any insurance product costs. No insurer shall pay an insurance consultant any commission or other form of compensation for any insurance consultant services provided in connection with any contract awarded to an insurer by a contracting unit.
c. (1) (a) An insurance consultant seeking a contract for the provision of any insurance consultant services to a contracting unit shall, in the competitive contracting proposal, certify that no commission or other form of compensation will be accepted from an insurer for any insurance consultant services provided in connection with any contract awarded to the insurer by the contracting unit.
(b) An insurance consultant awarded a contract for the provision of any insurance consultant services to a contracting unit shall, as soon as practicable after being awarded a contract, but no later than the date on which an insurer is recommended to the contracting unit, disclose in a statement to the contracting unit the aggregate amount of commissions or other forms of compensation received in each of the preceding three years from each insurer that submits a proposal.
(c) An insurance consultant awarded a contract for the provision of any insurance consultant services to a contracting unit shall, no later than the last business day of each year of the contract, certify to the contracting unit that no commission or other form of compensation has been accepted from an insurer for any insurance consultant services provided in connection with any contract awarded to the insurer by the contracting unit.
(2) (a) An insurer seeking a contract for the provision of any insurance products to a contracting unit shall, in the competitive contracting proposal, certify that no commission or other form of compensation shall be paid to an insurance consultant for any insurance consultant services provided in connection with any contract awarded to the insurer by the contracting unit.
(b) An insurer awarded a contract for the provision of any insurance products to a contracting unit shall, no later than the last business day of each year of the contract, certify to the contracting unit that no commission or other form of compensation has been paid to the insurance consultant for any insurance consultant services provided in connection with any contract awarded to the insurer by the contracting unit.
d. Upon a violation of any provision of subsections b. or c. of this section by an insurance consultant or insurer, the contracting unit shall be entitled to terminate any contract with the insurance consultant or insurer and to recover in a civil action the amount of any commission or other form of compensation paid in violation of subsection b. of this section.
e. (1) The request for proposal documentation shall include: the compensation restrictions set forth in subsection b. of this section; the manner of compensation; the certification and disclosure requirements set forth in subsection c. of this section; the penalties for violations set forth in subsection d. of this section; the terms, coverages, and costs of current insurance products or insurance consultant services; the loss experience; and the anticipated insurance product or insurance consultant service needs.
(2) The request for proposal documentation shall be made available to proposers in electronic format.
f. (1) The notice of the availability of request for proposal documentation shall be published in an official newspaper of the contracting unit, a newspaper of general circulation in at least five counties of this State, and on the contracting unit’s Internet website at least 60, but no more than 120, days prior to the date anticipated for the commencement of the contract.
(2) The request for proposal documentation shall be submitted to at least one joint insurance fund, established pursuant to P.L.1983, c.372 (C.40A:10-36 et seq.), at the same time the notice of the availability of the documentation is published to determine if it would be advantageous for the contracting unit to become a member of the joint insurance fund.
(3) Each interested insurer or insurance consultant shall submit a proposal to the contracting unit at least 30 days prior to the date anticipated for the commencement of the contract.
(4) The purchasing agent or counsel or administrator shall obtain at least three proposals.
(5) The report prepared by the purchasing agent or counsel or administrator evaluating and recommending the award of a contract or contracts shall include an analysis and discussion of the availability, terms, and price of comparable coverage through participation in at least one joint insurance fund and, with respect to health insurance, the State Health Benefits Program.
g. As used in this section:
“Insurance” means any lines of insurance in subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes that are commonly available in a competitive market, including but not limited to life, health, annuities, indemnity, property and casualty, fidelity, surety, guaranty, and title insurance.
“Insurance consultant” means an individual or a business entity providing, for a commission, brokerage fee, or other consideration, services, including but not limited to brokerage, risk management, and related administrative services associated with the procurement, evaluation, and advice, counsel, or opinion with respect to the benefits, advantages, or disadvantages of any insurance product or contract that is or could be issued to a contracting unit.
“Insurer” means a business entity authorized to transact the business of insurance in this State pursuant to subtitle 3 of Title 17 of the Revised Statutes or subtitle 3 of Title 17B of the New Jersey Statutes.
“Other forms of compensation” includes but is not limited to incentive payments, bonuses, rebates, or any other thing of value.
3. This act shall take effect immediately and apply to contracts involving insurance commonly available in a competitive market to be awarded on or after the first day of the fourth month next following the date of enactment.
STATEMENT
This bill would require counties and municipalities, and their agencies and authorities, and boards of education to use the established competitive contracting process, and to follow new supplemental requirements, for procuring any insurance products and insurance consulting services. Under current law, such contracts are exempt from public bidding requirements.
Specifically, the bill would require boards of education and local contracting units seeking to procure any insurance products and insurance consulting services to do so by the award of a contract through the competitive contracting process set forth in sections 45 through 49 of P.L.1999, c.440 (C.18A:18A-4.1 et seq.) and sections 1 through 5 of P.L.1999, c.440 (C.40A:11-4.1 et seq.), as applicable.
This bill would supplement these provisions with respect to insurance product and insurance consulting service contracts as follows:
First, an insurance consultant providing any insurance consultant services to a board of education or local contracting unit would be required to be compensated directly and exclusively by the board of education or local contracting unit at a fixed amount, an hourly rate, or on another common and readily comparable basis, provided that the compensation shall not be determined as a percentage of any insurance product costs, and would not be permitted to accept any commission or other form of compensation from an insurer for any insurance consultant services provided to the board of education or local contracting unit. Compensating insurance consultants in this manner is intended to help ensure that their interests are solely aligned with those of the board of education or local contracting unit.
Second, insurance consultants and insurers would both be subject to several certification and disclosure requirements related to the restrictions on insurance consultant compensation.
Third, the request for proposal documentation would be required to include additional items including the terms of compensation; the certification and disclosure requirements; the penalties for violations; and certain details with respect to current insurance use and anticipated insurance needs.
Fourth, the competitive contracting proposal solicitation process would be supplemented in several respects. The notice of the availability of request for proposal documentation would be required to be published through more outlets and in a new timeframe, at least 60, but no more than 120, days prior to the date anticipated for the commencement of the contract. The request for proposal documentation would also have to be submitted to at least one joint insurance fund, established pursuant to N.J.S.40A:10-36 et seq., and with respect to health insurance, to the State Health Benefits Plan, at the same time it is published. Each interested insurer or insurance consultant would be required to submit a proposal at least 30 days prior to the date anticipated for the commencement of the contract. At least three proposals would be required to be obtained. The report evaluating and recommending the award of a contract or contracts would be required to include an analysis and discussion of the availability, terms, and price of comparable coverage from at least one joint insurance fund and, with respect to health insurance, the State Health Benefits Plan, ensuring that alternative insurance products available to the board of education or contracting unit, which may be more cost-effective options, are considered.
Finally, this bill would subject insurers and insurance consultants to civil liability for violations of its provisions.
Insurance is one of the major expenses of boards of education and local contracting units. Requiring boards of education and local contracting units to use an open, transparent, and competitive process for the award of insurance contracts would help ensure that the lowest possible cost is realized and help protect against waste, abuse, and insider deals, ultimately saving taxpayer money.