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State wants Local Government Center to increase workers' comp guaranty

New Hampshire Union Leader

March 24. 2013 8:10PM

CONCORD - The state Department of Labor has told the New Hampshire Local Government Center it must increase by almost $2 million a bank guaranty that ensures claims in LGC's troubled workers' compensation program will be paid.

The order coincides with the Labor Department examining an allegation that LGC is operating as an employee leasing company without a license, a violation that could carry a fine of $1,000 per day per employee.

Acting Labor Commissioner David Wihby said LGC will be required to increase the workers' compensation security guaranty from $12.4 million held in two accounts to a total of $14.3 million.

"Our main job is the protection of injured workers," Wihby said. "One way we make sure those workers are protected is having securities in place."

LGC interim Executive Director George Bald said LGC will comply with the order.

LGC's main competitor in the public workers' compensation field, Primex, has a larger coverage pool and has given the Department of Labor a guaranty of $36.5 million, Wihby said.

Wihby said the Labor Department is also examining whether LGC, which splits the time for many of its employees among its various risk pool operations, is doing so as an employee leasing company, which without a license would violate state law.

"There have been accusations made they are a leasing company and we are looking into it as we would any accusation," he said.

Bald said he believed the accusations had no merit, though he said he has asked LGC in-house attorney David Frydman to look into it.

According to state law, a leasing company is defined as an organization that provides employees to other companies under a lease agreement, though on an ongoing, rather than temporary, basis. It typically saves the buying company costs such as health insurance.

"I don't believe (LGC is) a leasing company," Bald said. He said most LGC employees work full time and have benefits.

According to LGC records, 46 of the organization's nearly 100 employees split their time among the organization's various entities.

However, Wihby said "nine times out of 10" such allegations turn out to be fruitless and that the fines "can be harsh, but they can also be waived.

"At first blush, I don't think we're going to find anything," he said. LGC "sounds like more of a corporation paying the subsidiaries."

The violation could come with a fine as high as $1,000 per day per employee, though Wihby said the fine is an extreme.

"Just because it could end up being a lot of money doesn't necessarily mean it would be," he said.

Since its inception in 2000, the LGC workers' compensation program has lost money annually and has been subsidized by contributions from LGC's health insurance risk pool and from members of the property and liability risk pool. The Secretary of State's Office in August ordered LGC to repay $17.1 million to towns and cities in the health insurance pool by Dec. 1. The LGC has appealed the order to the state Supreme Court.

LGC officials have said the workers' compensation program, which has no cash reserves, could collapse if the state order isn't modified or overturned. About 220 municipalities and 25,000 employees are covered by LGC's workers' compensation program. The workers' compensation program's parent organization, the Property and Liability Trust, has cash reserves, but not enough to pay the order and maintain enough to cover claims, LGC has said.

Property and Liability Trust and LGC's health insurance provider, HealthTrust, have additionally been ordered to repay $3 million and $33 million, respectively, from cash reserves that the state deemed to be too high.

No matter what happens to the workers' compensation program, worker claims would be paid because of the security guaranties, which LGC cannot touch without the blessing of the Department of Labor.

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