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N. H. communities owed 7 years of insurance refunds, says state

CONCORD — Taxpayers who paid the Local Government Center for public employee insurance should be reimbursed 1 percent of the total cost dating back to 2004, according to the state Bureau of Securities Regulation.

The LGC “improperly retained” more than $100 million paid by contributing cities and towns, has the money at its disposal and should refund it, said BSR staff attorney Earl Wingate III. The simplest way for a municipality to determine what is owed as a refund, he said, is to calculate 1 percent of bills paid to the LGC for the years 2004 to 2010.

Wingate said he has not yet made a demand of the LGC for across-the-board 1 percent refunds, but that’s the number he plans to present. He added he hopes the debate will not end up in court as taxpayers would pay for both sides of the litigation.

The LGC was formed as an insurance pool for cities and towns to achieve favorable health insurance rates and is funded by taxpayers and public employees. Portsmouth demanded a $282,436 worker’s compensation refund at the end of 2010 but was denied.

Wingate issued a statement on Wednesday urging the LGC to return surplus money it “improperly retained” and “skimmed” monies “from its health and property liability programs to subsidize its workers compensation pool and a so-called ‘strategic plan.'” He reminded the bureau hired a Boston actuary, which found the LGC kept a “bloated” surplus in 2009 when it could have returned $20 million to $40 million “to local taxpayers without affecting the financial health of the risk pools.”

He said his office had not yet studied the LGC budget for 2010 but believes “even more money” could have been returned last year. He said the investigation is ongoing and a final report is expected from his office in the near future. No criminal activity is alleged, he said.

David Frydman, LGC’s general counsel, said the bureau’s conclusion was “based on incorrect interpretations of law and a lack of understanding of the facts.” He also said LGC practices were based on advice from legal counsel.

Last month, during negotiations between the LGC and the Secretary of State’s office for the return of surplus LGC money to contributing cities and towns, the LGC introduced, through a state representative, legislation to change oversight of the municipal health insurance pool. Wingate at the time said the House bill would eviscerate his investigation.

LGC Director Maura Carroll countered in a press release that the bill, “will help create a better method of oversight, add transparency, and ensure that the appropriate regulatory tools are in place.”

Secretary of State William Gardner said the funds held by the LGC for public employees’ insurance is “all public money. It’s not their money.”

The Legislature last year passed House Bill 1393, which granted Gardner oversight of the LGC. A few months later, Wingate’s office released a preliminary report noting the LGC banked twice the amount of necessary reserve funds. By law, all surplus funds must be returned to the contributing municipalities, with Portsmouth being the largest contributor, paying 1.4 percent of the total pool.

The LGC’s proposed legislation would follow insurance industry standards for surplus money banked, while Wingate recommended a formula that would have meant the LCG banked $40.8 million in reserves during 2009, when it held $79.5 million in reserves. The lower amount, he said, “would have been sufficient to assure the solvency of the plan.” Wingate’s team, which included the contracted actuary, concluded the measuring method the LGC uses to determine how much to hold in reserves is appropriate for for-profit insurers, but not the state. Instead it recommends the “Stochastic Method” that reveals the “LGC is retaining significant surplus.”

A report by Wingate in late 2010 noted the LGC improperly used member contributions to fund the workers’ compensation program by forcing retirees to subsidize a program they’re ineligible to use. The LGC workers’ compensation program also forced contributing communities to subsidize employees in other communities, the reported noted.

A day before the report was released, the LGC announced it ceased using health insurance contributions to fund workers’ compensation.

Hampton resident David Lang, president of the Professional Fire Fighters Association of New Hampshire, initiated the LGC controversy through a series of Right To Know requests that went to the state Supreme Court twice. On Wednesday he renewed a call for the resignation of LGC managers.

Wingate’s interim report noted LGC expenditures for 2006 included public money spent on caterers, the Mountain Club at Loon, the 100 Club in Portsmouth, the Holiday Inn on the Bay, comedy clubs and comedians, restaurants, The Galley Hatch Conference Center, the Wayfarer Inn, Gunstock Inn, Gunstock Area, the Woodstock Inn & Resort, the Red Jacket Mountain View Resort, the Washington Street Cafe, the Attitash Grand Summit Hotel, the Hilton Garden Inn and the Mountain Club on Loon, among other expenses.

“Similar expenditures” were found for 2007 and 2008, the bureau found, but details for those expenditures have not been released.

Carroll characterized them as costs of doing business.

Sea Coast Online

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Written by lordsinsurancelog

May 13, 2011 at 5:55 pm

Posted in Lords Insurance