Another state watchdog is sounding the alarm about waste and abuse connected to the widespread use of insurance brokers who arrange health care coverage for New Jersey public school employees.
Investigators with the Office of the State Auditor found that the Bridgeton Public Schools — among the state’s neediest, and where more than nine out of 10 students are Black or Latino — overspent on employee benefits by nearly $8 million.
An Oct. 21 report signed by Auditor David Kaschak reveals that Bridgeton’s outsized health care payments came after an insurance brokerage firm allegedly provided misleading information in a cost comparison report that steered the school district away from potentially cheaper alternatives.
The cost comparison report recommended health care coverage plans that have directed millions in taxpayer money every year to the brokerage company and a subsidiary firm that also provides insurance services to Bridgeton and other South Jersey public schools, according to auditors.
“The broker may lack independence to perform the cost comparison because it benefits financially if the district continues with its current coverage,” according to the audit. “We saw no evidence that the broker recommended or that the district participated in the more cost-effective plan.”
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The findings of the newly released audit echo warnings that have been made for more than a decade by state investigators and good-government groups who say local New Jersey officials waste millions in the procurement of insurance services.
Those watchdogs have described a system influenced by pay-to-play politics and riddled with conflicts of interest. They say it is also an opaque system where financial arrangements between insurance brokers and administrators who manage insurance funds are hard to discern.
State investigators have found that independent insurance brokers have little incentive to arrange the most cost-effective insurance plans for government clients because it would reduce the overall size of their commissions. Investigators have urged towns and local agencies to hire their own brokers at a set salary or require independent brokers to reveal how much they earn in commissions on public contracts.
A comptroller’s office study released in 2012 concluded that New Jersey towns were losing $100 million a year in potential savings by relying too heavily on commission-based insurance brokers.
In September, Acting State Comptroller Kevin Walsh released a report describing how locally controlled health insurance funds that cover more than 100,000 public employees in New Jersey routinely ignore public contracting laws while sending millions in taxpayer money to powerful private firms.
“Audits of municipalities and school districts have repeatedly documented how insurance brokers have built-in conflicts of interest, misrepresent costs associated with alternatives, and fail to disclose the commissions and incentives they receive from insurance companies they recommend,” Walsh said.
Walsh’s report was met with heavy pushback from the brokerage industry, which said Walsh’s findings were slanted and contained factual errors, a claim Walsh’s office said was untrue.
The newly released audit, which examined Bridgeton school district spending from 2021 to this year, found issues beyond insurance.
The district, for example, spent $411,000 on health coverage for ineligible members. The auditors also revealed $1 million in excessive time-off payments to employees, and issues with the universal preschool program, where one employee’s child was allowed to attend without paying $15,000 in tuition.
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Pasquale Yacovelli, the school business administrator and secretary to the school board, did not return calls or emails seeking comment for this story. Yacovelli also serves as the school district’s representative to the Southern Coastal Regional Employee Benefits Fund, a regional insurance pool that manages health benefits for Bridgeton and nearly three dozen other South Jersey public school districts.
Yacovelli, in a written response to the state auditor, defended the school district’s insurance broker and said that lower-cost insurance coverage available through the state School Employees Health Benefits Program — New Jersey’s largest insurance pool for public school workers — was rejected as too risky.
The state insurance pool, Yacovelli wrote, faces “structural issues” that experts say would soon lead to a 32% rate hike for members of the state plan.
“A rate increase of this magnitude would prove catastrophic to the district as it attempts to navigate an uncertain future for New Jersey’s school aid funding formula,” he wrote, adding that he saw no conflict of interest in the work of Bridgeton’s insurance broker.
Brandon Lodics, executive director of the Southern Coastal Fund and a partner at PERMA Risk Management Services, said he was unaware of the audit and directed all questions to the school district and the insurance brokerage that is the focus of the state audit.
The audit does not name the insurance broker that it alleges prepared the misleading cost comparison report, or the related firm it identifies as “program manager” for the insurance fund.
But records published online by the Southern Coastal Fund name the fund’s program manager as Shared Health Alliance, a subsidiary of Allen Associates that was created in 2011, according to the company website. Both companies list the same corporate address in Vineland, Cumberland County.
The companies share common executives. Richard S. Allen, for example, a partner in the brokerage, is listed in meeting minutes of the Southern Coastal Insurance Fund as representing Shared Health Alliance.
Lodics directed The Jersey Vindicator’s request for the Allen Associates brokerage contract to the Bridgeton school district. In an emailed statement, he said the executive director of the Southern Coastal Fund does not select brokers or set their pay.
“The fund does not participate in, oversee, or have visibility into those individual agreements,” Lodics said.
Richard S. Allen did not return phone calls or emails seeking comment for this story.
Public records show Allen Associates has been paid about $200,000 a month in broker fees by the Southern Coastal Fund. A review of records for 2023 and 2024 shows similar payments to Allen.
The fund also paid Shared Health Alliance an average compensation of $2.7 million in 2022 and 2023 for program management, according to documents cited by state auditors. In January, the fund approved a new contract for Shared Health Alliance that provides more than $3.7 million to the firm in 2025.
Bridgeton is a Schools Development Authority district that received approximately 85% of its revenues from the state.
The district provides regular and special education services for grades pre-kindergarten through 12. From fiscal year 2022 through 2024, the average daily enrollment for the district was 5,816 students, and there were approximately 972 full-time employees.
A recently released report by the New Jersey Department of Education shows that the majority of Schools Development Authority districts — formerly known as Abbott districts — do not have sufficient space to meet student needs, highlighting an ongoing crisis in school infrastructure.
The state auditor’s report on the Bridgeton Schools was the third such review from that office in recent months highlighting potential waste linked to insurance brokers. A July 2023 report found that the Plainfield Public School District could have saved $6.4 million by joining the state benefits system.
In July, auditors found that the Salem district in South Jersey lost $761,000 in potential savings by relying on a broker.
“This arrangement, while not uncommon in the insurance industry, gives the broker no incentive to recommend less expensive alternatives because it earns more when the district pays more for benefits,” the Salem audit concluded.
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