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February 07. 2014 3:45PM

Regulators move to strip former LGC subsidiary HealthTrust of non-profit status

CONCORD — State regulators on Friday filed a motion to strip HealthTrust, a former New Hampshire Local Government Center subsidiary that runs the state’s largest public insurance risk pool, of its non-profit status, a move that would subject the organization to insurance regulation and taxation.

A release from the Bureau of Securities Regulation said the move comes in response to HealthTrust and another former LGC subsidiary, Property-Liability Trust, reaching a secret agreement in October to transfer all of PLT’s assets and liabilities to HealthTrust. The agreement became effective in January when the state Supreme Court upheld most of Secretary of State hearing officer Donald Mitchell’s order, issued in August 2012, that LGC split its operations into separate entities and repay more than $50 million to member political subdivisions.

The agreement, which wasn’t made public until after the Supreme Court released its decision Jan. 10, called for PLT to be absorbed into HealthTrust, which the BSR said violates the Mitchell order.

“This portion of the Mitchell order also expressly stated that a failure to reorganize into separate pools would result in the revocation of the pools’ status as” non-profit risk pools, the release said. “This would subject the pools to insurance regulations and state taxes, from which they are currently exempt.”

HealthTrust Executive Director Peter Bragdon, who is also a state senator, said HealthTrust believes its actions will be vindicated.

“An independent arbiter, I think, will find we are in full compliance,” he said. “I think that when the theatrics are over, it will be shown that HealthTrust acted in full compliance with the order and in the best interests of our members.”

HealthTrust and PLT reached the agreement because a portion of the order called for PLT to repay $17.1 million that Mitchell ruled, and the Supreme Court upheld, had been illegally transferred from HealthTrust to prop up a money-losing workers’ compensation program for more than a decade.

Bragdon and attorneys for HealthTrust and PLT have said the agreement avoids having PLT, which does not have enough cash on hand to make the payment, go bankrupt. They have said bankruptcy would be more expensive and take longer to execute than the agreement. He said the agreement was kept secret because it would have undermined the ability of PLT to seek renewals from members late last year. Without that business, he said, the ultimate return of funds to HealthTrust would have been diminished.

“All that was done was in the best interests of maximizing those assets and returning them to (HealthTrust) members,” he said.

The motion comes after a meeting Tuesday between LGC officials and lawyers and the BSR, at which LGC attorneys said they wanted an “open” and “honest” dialogue with the BSR and to provide more details of the agreement, which the BSR said it was never told about until it was made public in January.

According to HealthTrust meeting minutes, the HealthTrust board met Oct. 28 to vote on and sign the agreement. The meeting officially was held in the Londonderry School District office of HealthTrust board Chairman Peter Curro, who is the district’s business administrator, rather than at the Triangle Park Drive office shared by HealthTrust and PLT. Other board members participated by phone. The PLT board voted to accept the agreement the following day.

BSR attorney Andru Volinsky said any agreement regarding the payment cannot be altered without Mitchell’s approval.

“I was surprised they didn’t think to consult a regulator before entering into an agreement that purports to cut off the requirements of an administrative order,” he said. “If they wanted relief from that, they should have come to the Bureau and asked Mister Mitchell for some revision of the order.”

The BSR release said it received complaints from several communities, including North Hampton and Stratham, both of which sent letters to Secretary of State William Gardner asking him to intervene over the secret agreement, saying they felt deceived into purchasing products from the entities, given that they were not told about the agreement.

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