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NH Local Government Center accused of violating rules set by Secretary of State

New Hampshire Union Leader

March 10. 2013 8:55PM

CONCORD - The New Hampshire Local Government Center's HealthTrust program will recommend an overall rate increase of 5.8 percent for participating municipalities, school districts and retirees in one of its risk pools.

But, during a hearing last week on the potential rates, representatives of some of those entities questioned part of the increase as an inflated padding of LGC's claims reserves in violation of rules established by the Secretary of State's Office.

"This will take that money out of the communities' hands and place it into a surplus line of the budget of the LGC," said David Lang, president of the Professional Fire Fighters of New Hampshire.

At issue is about $5.9 million the HealthTrust program has recommended setting aside in claims reserves that Lang and others at the hearing said is beyond a benchmark set by the Secretary of State's Bureau of Securities Regulation. The order by the Secretary of State, issued in August, says LGC may set aside a reserve that is equal to 15 percent of anticipated claims or a risk-based capital ratio of 3.0, whichever is lower.

That benchmark was part of an order that called for LGC to repay member towns and cities more than $53 million that was either held in claims reserves or was used to subsidize LGC's workers' compensation program, which has annually lost money.

Lang and others at the meeting said the additional money equates to holding 17 percent of claims in reserve, which he said would violate the Secretary of State's claims reserve order.

"Isn't this just another add-on that adds to the cost of health insurance?" Lang said.

Wendy Parker, LGC's deputy director for risk pool operations, said the additional $5.9 million, which comprises a capital maintenance risk charge of 0.95 percent and an "additional risk charge" of 1 percent of expected total claims, is what LGC anticipates it will need to keep its claims reserve at 15 percent of claims in the future and to guard against catastrophic claims. She said any surpluses at the end of the year would be returned to member communities.

She disagreed with Lang that the money would be part of a surplus for LGC.

"I really don't think that that's adding," she said. "I believe that's keeping that level at 15 percent."

The hearing was held Thursday at LGC's offices in Concord. Lang, who has led a decade-long push for increased transparency by the LGC that resulted in a Supreme Court ruling in 2010 that forced LGC to be subject to state right-to-know laws, provided a video of the hearing to the New Hampshire Union Leader.

The overall rate increase of 5.8 percent reflects individual rate adjustments that range from as low as a decrease for some member communities to increases as high as 14 percent, Parker said. She said the July pool has 59 individual rating entities. Some are single communities, others are combinations of municipalities pooling together for single rates, she said.

Parker said HealthTrust projects that claims from July 1 through June 30, 2014, will be about $302 million for its July risk pool, which has 137 member communities comprising more than 46,000 employees, retirees and their families.

She said the July pool had nearly $272 million in total claims from December 2011 through November 2012.

The pool's rates are set for a fiscal year running from July 1 through June 30. HealthTrust has about 150 more member communities and school districts in a January risk pool, which operates on a calendar year.

The recommended rate increases are subject to approval by the HealthTrust Board of Directors, Parker said.

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