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Local Government Center to keep insurance surplus

New Hampshire Union Leader

July 28. 2013 9:15PM

CONCORD — The New Hampshire Local Government Center will use most of a return of health insurance surplus funds it is giving itself as a “wash” that will go back to the risk pool’s surplus.

LGC, which administers several forms of insurance coverage for public entities throughout the state, will provide nearly $270,000 to itself from returns of surplus from its health insurance risk pool, HealthTrust. Interim Executive Director George Bald has said the agency is entitled to the return because, “we’re a member,” whose employees are insured by HealthTrust and because a state hearings officer mandated that returns go to members.

He said LGC will provide a portion of the refunds to LGC employees who paid premiums for health coverage, with the remainder being returned to HealthTrust’s surplus.

At a July 11 meeting of the HealthTrust Board of Directors, board members and LGC attorney David Frydman repeatedly referred to the move as a “wash” of funds, as LGC would not actually keep any money itself, but would ultimately return the money to members when surplus funds from HealthTrust are returned.

The decision by LGC to return money to itself was criticized by several people, including Barry J. Glennon, director of the state Bureau of Securities Regulation, which is LGC’s regulator. The matter was also questioned earlier this month by HealthTrust board member Daniel Rossner, who said the return comes across poorly in the public eye.

“There is a building public sentiment that if they were overcharging them to begin with, why are they going to get it back?” Rossner said. “It just builds on what we’re trying to get away from.”

Bald said LGC had, in the past, used surplus returns to reduce LGC’s payments for health insurance coverage through premium holidays that were extended to every member. He said another recent return of about $55,000 was used “to defray costs.”The return in question now stems from $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. LGC’s cut is about $144,000.

That return is in addition to about $125,000, which includes the $55,000 paid out last December, that LGC has or will return to itself as part of other surplus returns beyond the hearing officer’s order.

Rossner, though, said at the meeting that he would have preferred if LGC kept only the employees’ portion and didn’t take its employer contribution at all, rather than creating a system where the funds would be “washed” back to HealthTrust.

“I just don’t see the value in doing the wash. I think there’s more value in not doing the wash, from a public perception standpoint,” he said.

The board, though, agreed to proceed with the return and issue letters to members explaining what would happen with the money.

LGC is not the only administrator of a public insurance risk pool that returns surplus funds to itself.

Primex, which provides workers’ compensation coverage to 445 communities and other public entities, also participates in its own risk pools and provided itself with premium holidays as a part of returns of surplus funds. The agency returned a total of $6,842.29 to itself in 2012 and 2013 in the forms of premium holidays, said Ty Gagne, Primex’s executive director.

Gagne said Primex didn’t keep the money, as holidays meant member communities, who pay for Primex’s insurance coverage as part of administrative expenses, had a lower bill for Primex’s workers’ compensation coverage.

Primex “reduced dollar for dollar the amount that the pool members subsequently paid as an administrative expense to insure Primex,” Gagne said.

Primex and another provider of public health insurance, SchoolCare, negotiated agreements with the Bureau of Securities Regulation in 2011 for returns of surplus funds. LGC, on the other hand, fought the BSR process through a lengthy hearing process that culminated in the order handed down in August 2012 that calls for LGC to return a total of $53 million to taxpayers.

LGC’s decision to fight has resulted in more than $2 million in taxpayer funds spent on legal expenses since the BSR review process began and through LGC’s appeal to the state Supreme Court to contest the order. The court hasn’t yet held hearings on the matter.

By comparison, Primex spent $31,799 in legal fees through its negotiation process with the BSR, Gagne said.

Like LGC and Primex, SchoolCare also participates in the risk pool it manages. Unlike LGC and Primex, however, SchoolCare did not give itself any returns of surplus.

“After careful consideration and management’s recommendation to the Board of Directors, it was determined that the intent of the Agreement (with the Secretary of State’s Office) was to return the surplus to members,” excluding SchoolCare, Executive Director Lisa Duquette said in an email.

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