CONCORD — When the New Hampshire Local Government Center returns more than $50 million in surplus funds to members of its health insurance risk pools, it plans to return about $260,000 to itself.
The agency's interim executive director defended the refund, but it drew a rebuke from a state regulator and from LGC's critics.
LGC, which administers insurance risk pools for hundreds of towns, villages, school districts and quasi-government agencies in New Hampshire, is set to receive about $132,000 in surplus health insurance money and about $12,000 from a dental program surplus, according to a list LGC posted on its website.
The returns are part of $33.2 million that a state Bureau of Securities Regulation hearings officer ordered LGC give back to members of its health insurance pool. LGC was ordered to return the funds to entities that were members of its HealthTrust program as of 2010 and plans to issue checks on Aug. 27 to meet a Sept. 1 deadline.
Those returns are in addition to about $120,000 that LGC has scheduled to return to itself later this year as part of a return of about $20 million in surplus funds from contributions by members in other years.
LGC employees receive health insurance primarily through HealthTrust, said George Bald, LGC's interim executive director.
"We're a member," he said. "The order says every member gets money back."
A state law, RSA 5-b, says that any public risk pool money not used for administration, claims, reserves and purchasing re-insurance must be returned "to the participating political subdivisions."
Bald said LGC believes it is a political subdivision, as the law defines political subdivisions as "any city, town, county, school district, chartered public school, village district, school administrative unit, or any district or entity created for a special purpose administered or funded by any of the above-named governmental units."
Bald said that, because LGC receives money to its subsidiary insurance offerings from governmental units, "under that section, we're included."
Not so, said Barry Glennon, director of the state Bureau of Securities Regulation. He said LGC's bylaws, in defining who is eligible to participate in the public risk pool, differentiate LGC and its subsidiaries from the entities covered by the definition of a political subdivision under state law.
"It does not appear the Local Government Center meets the definition of political subdivision under the statute which would entitle them to a return of surplus. In fact, their own bylaws exclude them from that definition," he said.
"It doesn't seem right that they appear in a list of their own victims as being entitled to a return of surplus funds. The money should go back to taxpayers and not the party that caused this."
LGC's critics said the agency should remove itself from any surplus returns.
"Public risk pools were designed to be merely pass-through organizations where they collect money, purchase insurance and return any remaining money to the taxpayers and active and retired employees," said David Lang, president of the Professional Fire Fighters of New Hampshire, which led a decade-long battle to force LGC to open up its operations.
"We believe this money never was, is not currently nor should be in the future, money that belongs to the LGC. As we've been saying for over a decade, this surplus belongs to the taxpayers and the active and retired employees of this state," he said.
Greg Moore, executive director of the conservative Americans For Prosperity — New Hampshire, also said LGC is not entitled to keep any of the returned surpluses."Clearly, the choice by the LGC to pay itself as opposed to returning their overcharge back to the hard-working taxpayers demonstrates that they have not learned their lesson which got them in this mess in the first place," Moore said. "The pooled risk law … that allows groups like the LGC to exist was specifically designed to protect property taxpayers, not to allow these groups to build empires with our money."
Moore also called on any political subdivision receiving a refund to return the money directly to taxpayers, and not use the funds to "grow government."