Innovative Fuentes, Coutinho, Jimenez, Burzichelli & Mosquera Bill to Entice Private Entities to Fund Health Care Initiatives Approved by Assembly

(TRENTON) – Legislation Assembly Democrats Angel Fuentes, Albert Coutinho, Angelica Jimenez and John Burzichelli sponsored to establish a five-year pilot program to encourage private investment in preventive and early intervention health care to reduce public costs was approved Thursday by the Assembly.
Under the New Jersey Social Innovation Act (A-3289) the New Jersey Economic Development Authority will establish a social innovation loan pilot program to guarantee loan agreements among lenders, eligible nonprofit organizations, and public sector entities.
The loan agreements authorized by the substitute would:
· Provide an eligible nonprofit organization with direct funding from a lender in exchange for the provision of public health care services to a public sector entity;
· Require the public sector entity receiving public health care services to make defined payments to the lender in an amount proportional to the amount of savings generated by the provision of public health care services; and
· Authorize the lender to receive loan repayments from the public sector entity in exchange for the provision of funding to an eligible nonprofit organization. In the event that the anticipated savings are not achieved, the authority will provide a loan guarantee for the lender.
“Providing adequate healthcare to our neediest residents can be costly to service providers, governments and residents,” said Fuentes (D-Camden/Gloucester). “This bill seeks to reduce healthcare costs in the long run while increasing the wellness of our residents without raising taxes.”
“This could revolutionize the way we fund social change, shifting the financial risk of implementing these programs from the public to private investors,” said Coutinho (D-Essex). “If we can reduce the shared cost of healthcare, everyone wins. At the same time, we’re improving people’s health and well-being while saving taxpayer money.”
“The legislation will be the first of its kind to fund healthcare initiatives through Social Impact Bonds,” said Jimenez (D-Hudson/Bergen). “The State of Massachusetts is exploring two bonds – one to help juveniles transition from the justice system to adult life, and the other to house the chronically homeless. These pilots could open the door for Social Impact Bonds to generate capital for a number of initiatives throughout our state and across the country.”
“We need to look at different ways to fund public policy needs in this difficult economy when many working class families are struggling to make ends meet,” said Burzichelli (D-Gloucester/Salem/Cumberland). “If this type of legislation can open the door to funding needs without relying on taxpayers, then it must be explored.
“This is a new way of looking at accomplishing our goals,” said Mosquera (D-Gloucester/Camden). “We cannot continue to do things the old way with limited resources and expect different results. We need to be innovative.”
Under the bill, provision of the guaranteed loan also requires an agreement among the parties establishing a method of measurement and verification that ensures that health care services were performed, calculating any public sector savings resulting from those services and determining any interest rates or payments applicable to the agreements.
The bill allows the guarantees issued by the authority to be up to 100 percent of the value of the loan agreements, with loan amounts not to exceed $3 million per year or $15 million in the aggregate over the five-year pilot program period. It requires the authority to solicit grants from philanthropic organizations or other private sources for the establishment and administration of the pilot program and capitalization of the “social innovation loan fund” created for such purposes.
The bill also establishes the “New Jersey Social Innovation Study Commission” within the authority to assist the authority in administering the pilot program and issue annual reports concerning the pilot program. It requires the authority to oversee the study commission, to determine the membership and size of the study commission and to appoint members to the study commission. It specifies three statutory members of the commission: the Director of the Office of Faith Based Initiatives in the Department of State, a representative from the Department of Health and a representative from the Department of Human Services
The study commission would:
· Identify the nonprofit organizations that will be eligible to receive loan guarantees from the authority;
· Assist the authority in soliciting donations for the “social innovation loan fund”;
· Help negotiate contract terms and conditions of the loan agreements among lenders, eligible nonprofit organizations, the authority, and public sector entities;
· Determine the necessity of retaining an independent intermediary to assist the study commission in the performance of its duties or to perform the measurement and verification functions needed to execute the loan guarantees; and
· Assist the authority upon request with any other issues related to the program.
The bill also establishes a non-lapsing, revolving fund called the “social innovation loan fund,” which will be used to guarantee social innovation loan pilot program loans, to fund the loan program, and to pay for expenses related to the administration of the loan guarantees.
The loan fund may be credited with monies from state appropriations, public or private donations, grant funding, loan guarantee program fees and any monies that the authority determines to deposit in the fund.
The bill will now be referred to the Senate.