Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Health Insurance

Garden State Gubernatorial Campaign Involves Insurer Money

Your article was successfully shared with the contacts you provided.

Insurer political contributions have surfaced as an issue in the New Jersey governor’s race, with Democrats attacking Republican standard-bearer Douglas Forrester for use of funds stemming from his ownership of a Washington captive insurer.[@@]

At issue are a variety of New Jersey state laws, including Section 34-2a of the state’s election statutes, part of the criminal law, which outlaws contributions by insurance corporations. The measure was enacted in 1911, when a slew of reform bills were passed to halt the influence of election spending by a variety of industries.

Today’s Democratic attack came not from Forrester’s opponent in the governor’s race==U.S. Sen. Jon Corzine==but from a leader in the Democratic-controlled Assembly, who called for an investigation and hearing concerning Forrester’s business dealings.

Forrester has a 51% interest in Heartland Fidelity Inc., a pharmacy benefits captive, and Democrats are contending that his ownership means his use of personal monies to fund his campaign is illegal.

A spokesman for Heartland, Peter McDonough, says that the company is chartered in Washington, that the company’s premiums are collected there and that the company is regulated by the Washington Department of Insurance, Securities and Banking.

“Our lawyers have reviewed this [contribution question] and there is frankly no issue,” declares McDonough, who says that a letter had been sent to the New Jersey Department of Insurance and Banking seeking an advisory opinion, which the company expects will support the findings of its attorneys.

Heartland’s position was attacked by New Jersey Assemblyman Neil Cohen, D-Union, N.J., who is deputy majority leader as well as the chairman of the state Assembly Financial Institutions and Insurance Committee.

Cohen announced that he had written to Donald Bryant, commissioner of the New Jersey Department of Banking and Insurance, asking Bryant to hold a formal investigation and public hearing.

According to Cohen’s reading of the law, the state of license or domicile is irrelevant. “If you are doing business in the state, then you are subject to the law,” Cohen says.

Forrester is the owner of Benecard, which, according to McDonough, manages prescription purchasing and dispensing fees for self-insureds and organization pharmaceutical plans and also offers fully-funded plans with a fixed limit.

McDonough says Heartland is a captive of 2 organizations made up of Benecard clients==Benecard Association Trust and Benecard Association. McDonough says the captive, created in 2003, is managed by the McCarran-Ferguson Captive Management Company Inc., Washington, and has a locally based manager. It provides stop-loss insurance for programs that go over their contract spending limit, he says.

Cohen, in his letter requesting an investigation, says Benecard operated from Lawrenceville, N.J., as Heartland’s general managing agent; offered its product in New Jersey; and sold Heartland insurance by bargaining with and securing “official approvals of municipal and county officials in New Jersey for Benecard contracts.”

If Heartland is doing business in New Jersey, it is avoiding a 1% premium tax amounting to $2 million a year, Cohen says.

Public employees in programs with Heartland backing don’t have New Jersey Life and Health Insurance Guaranty Fund support if the “thinly capitalized Heartland” becomes insolvent, Cohen writes. He suggests that several insurance statutes may be violated if Heartland and Benecard are illegally commingling non-insurance fees with premiums.

A spokeswoman for the New Jersey department, Jaimee Gilmartin, says the letter has been referred to the agency’s legislative and regulatory affairs unit for a review.

If the New Jersey. Department of Insurance and Banking should decide to refer the matter to the state attorney general, “we would weigh in,” says Lee Moore, a spokesman for the New Jersey Department of Law and Public Safety. “So far, there has been no overture to have us formally involved.”

News of Forrester’s insurance dealings have come at a time when Corzine is the focus of stories questioning his dealings with a former girlfriend, Carla Katz, who heads Local 1034 of the Communications Workers of America, which represents New Jersey state workers. Corzine, who has an estimated net worth of $15 million to $42 million, has acknowledged forgiving a $470,000 loan he made to Katz to help her buy out her ex-husband’s interest in a house that she and the ex-husband once owned in Washington.

McDonough says the Democrats’ questioning of Forrester’s dealings may be designed to “take the well-heeled and the high-heeled off the front page.”

Cohen says insurance infractions are unlikely to excite the electorate, but he says the Corzine campaign probably will present the issue as one of “illegal campaign contributions.”


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.