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State securities bureau seeks tighter controls on LGC risk pools

State House Bureau

October 02. 2013 8:56PM

CONCORD — The Bureau of Securities Regulations wants more transparency and tighter controls on how public risk pools are overseen.

The bureau presented suggested legislation to a legislative oversight committee Wednesday that includes separate boards for each risk pool and a prohibition of transferring funds between different pools.

The suggested legislation would also maintain bureau regulation of the risk pool trusts instead of transferring oversight to the Department of Insurance as some have suggested.

The legislation stems from a hearings officer’s order requiring the Local Government Center to reorganize and return more than $50 million in surplus funds to towns, cities, school districts and counties that purchased health, liability and workers compensation insurance from the organization.

The organization claimed the surplus funds were needed for the self-insured risk pool reserve funds for health insurance coverage, but the hearing officer disagreed.

The order also said the organization was incorporated illegally as a nonprofit limited liability company under Delaware law. Nonprofits cannot be LLCs under New Hampshire law, the order noted.

The organization has since reorganized, but critics say the current arrangement violates the order.

The LGC has appealed the order to the Supreme Court.

The Committee to Review the Hearings Officer’s Report heard Bureau of Securities Regulations’ consultant Michael Coutu say each risk pool should be separate with its own board of directors and should not share board members with other pools.

The separate boards need to address the needs and requirements of the individual pool, he said, to meet their fiduciary responsibilities.

Coutu was to work with the LGC to implement the hearing’s officer’s order, but the board of LGC’s health insurance risk pool, HealthTrust, voted not to proceed with that arrangement.

He said the risk pools need outside auditing and actuarial consultants to advise the boards, and need to bring in new auditors and actuaries every five years for a fresh look.

The risk pool board of directors should not include the officers of the organization, Coutu told the committee, in order to have greater independence.

He also said the bureau should continue to oversee the risk pools, which were established to be low-cost, financially efficient insurance plans for local government.

Insurance companies are highly regulated and compliance is costly, Coutu said, which defeats the goal of low-cost insurance.

Other suggestions address issues raised in the order such as prohibiting exclusive contracts with insurance managers that lock out cities and towns.

The committee is expected to develop recommendations for legislation to clarify state law governing the risk pools, but it may wait until the Supreme Court decides the LGC’s appeal of the order.

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