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Didn't that Manchester bank robber last week know that if you are going to rob a bank on Elm Street, ManchVegas, you are supposed to tape a tree to your head?
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Andrew Cline has been editorial page editor of the New Hampshire Union Leader since October of 2001. His writing has appeared in more than 100 newspapers and magazines, including The Wall Street Journal, The Washington Post, and National Review.State is wrongly seizing private funds
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By CHARLES M. ARLINGHAUS
Wednesday, Mar. 25, 2009
New Hampshire's budget is being balanced this year in part by turning private insurance funds into government money and appropriating the funds for government use. The raid illustrates how fiscal problems can tempt a government to limit property rights and rationalize behavior it would never consider otherwise.
No one knew there was $110 million available to the government sitting in an untapped fund. When legislators had passed a bill a few weeks earlier to clear out surpluses in other dedicated funds, they had found only about $16 million. The governor had waved a magic wand and -- presto! -- a huge chunk of money materialized.
It turned out there was good reason no one knew it was available. That's because it's neither state money nor a government program. The medical malpractice fund is a privately funded high-risk insurance pool administered by a private company through a provision in state law for joint underwriting agreements. The state doesn't pay for it or administer it. It is merely set up through state rules that allow for such joint agreements.
The co-operative fund assesses premiums and holds the money in trust against future charges. When it has a balance, it invests those funds according to a formula set up by its rules. The premiums and investment have been more than enough to pay charges, so the pool has a surplus.
This is exactly how mutual or cooperative insurance works. In the case of a typical mutual insurance cooperative, excess funds not needed to pay premiums are returned as a dividend to those who paid premiums. This may be how your car insurance works. In my case, we pay premiums throughout the year and then receive a check refunding excess premiums.
In fact, the cooperative medical malpractice fund has exactly the same provision. The money is held in trust but must be remitted to members or premium payers should there be a surplus. The wording is available in the rules on the insurance department's Web site. (It's rule 1703.07.)
The rule specifically requires that if premiums exceed the amount required to pay losses and expenses, they shall be distributed first to members and then the fund must "distribute the excess to such health care providers covered by the association as is just and equitable."
There's nothing weird about this. It is how any mutual insurance organization operates. Premiums are held in trust to pay claims. If you don't have claims, the premiums are not justified and cannot be justified.
The explicit rules of the underwriting agreement don't provide a third paragraph that says "yeah, but if the state's having trouble balancing its budget then nobody gets his money back and the state can just take it."
The state has a long memo from the Attorney General's Office that explains why in the attorney general's opinion no entity has enough standing "such that it could successfully challenge a legislative act to transfer the funds to the General Fund." Essentially the state argues that because joint agreements are allowed by statute, statute can be used to seize their funds. I'm not sure anyone who set up the fund realized that.
The attorney general also cites cases in other states where the state court allowed the legislature to take the money. In those cases, the agreement did not have rules providing for the distribution of any excess funds.
The governor and the attorney general's memo have also argued that a disbursement would be an unacceptable distortion of the market despite the rule requiring it. It is difficult to see how the very same disbursement my insurance company makes to me, and yours makes to you, is unacceptable just because the government desires the money. If it is, in fact, an unacceptable practice, then wouldn't all mutual insurance companies have to be abolished by state law? And wouldn't the state have made a huge mistake in approving the rules that govern this cooperative?
Ultimately, this is a seizure of private funds justified only by the cash crunch the state finds itself in. Argentina recently did something similar. Faced with a larger crisis than we face, the government nationalized private retirement funds, the equivalent of our 401(k) funds. The government seized billions in private funds to help its own cash flow. It was uniformly attacked as an unacceptable assault on private property. Let's not follow that bad example.
Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.
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YOUR COMMENTS
Welcome to the Democrat way of doing things. Want to see our future look at what they have done to MA.
- Bob, Salem
Gentlemen: let's not waste our keystrokes replying to Baghdad Bob. Most people stopped paying attention to his posts a long time ago, around the time he was blaming Republicans for mad cow disease. For him and his ilk, ongoing government encroachment, collectivism and unionized bureaucracies are always good and pure, while anything associated with economic freedom is wrong and evil. So it's easy for him to look favorably on a Democrat administration and Democrat legislature when they conduct an obscene money-grab of private cooperative funds in order to plug the massive budget hole created by their own fecklessness.
- Rick, Portsmouth
Robert from Deerfield - give it a rest. Lynch's theft is what's to be expected these days with the incompetents in Washington. The liberal dems think they can do whatever suits them at the moment. And they can - until the next election. By then you'll be wishing George was still at the helm.
- Brian, Farmington
So let me get this straight. A PRIVATE cooperative holding catastophic insurance for doctors which has extra money, because of strict oversight by non-public officers, is now a PUBLIC point of plunder by spendcrazy liberal Democrats in Concord.
But the Board of Directors of Concord Cable TV who control the money the city collects from cable subscribers and disburses to them from the city budget are a PRIVATE concern unanswerable to the right to know law.
All the usual suspects seem to be involved.
- Ed Naile, Deering
Sorry, I'm not from NH but stumbled across this and couldn't keep my mouth shut. What Robert needs to realize that this IS NOT THE STATE'S MONEY. Kevin is right - it is theft. When you justify theft for one party then the other side can do the same. When you grant power to one party you have to ask yourself would you grant it to the other? If the answer is no, then it is a power government should not have regardless of affiliation. It's not about right and left, it is about right and wrong. Thanks for letting me vent.
- David, Panama City FL
The hackarama will eventually issue an official statement on the technicality that lets the state raid this fund; but, like last time (the "deed transfer" of 1 mile of expressway), I much prefer Mr. Arlinghaus's description of the essence of what is happening.
- Spike, Brentwood NH
Robert, keep your discussion to the topic at hand. Your attempt at a red herring fallacy to distort your position is a betrayal of reason. First of all, the democrats have been running this State recently not the republicans, so there is your "fact check." Second, just because someone is from a certain political affiliation, that in no way influences or changes the truth or falsehood of what they are saying. Evaluate the argument on its own merits. Third, this article, if you read it, has nothing to do with the phone jamming cases, no bid earmarks, or the housing bubble. You are doing a disservice to yourself and others when you refuse to logically evaluate the argument and instead rely on fallacies. The argument is whether the government should be allowed to possess funds it does not own. According to the article "the state doesn't pay for it or administer it. It is merely set up through state rules that allow for such joint agreements." So the real philosophical question, the one you should have answered, is whether the state by the enactment of a law should be able to take money from an account that it neither paid for nor administers to balance the budget. Is the state allowed to take money from only one group of individuals who contributed to the fund, and if you think it should be able to, then why? And to bring the point home further, if Craig Bensen was still governor, would you want him to be able to do what Lynch is proposing?
- Brandon LaRoche, Rollinsford NH
Robert, as always your post has nothing to do with Charlies column. Your posts always contains the following 3 rants: no bid contracts, Bush, & republicans. I know you have only been a NH resident since 2000, but give me a break. I understand that you have an extreme crush on the government taking care of you, but maybe you should take all of the "no bid union contract" money you made in Boston and share it with the rest of us. Seems fair to me.
- Alex K., Deering, NH
Ah good ol' Robert from Deerfield, when he can't defend the actions of his sacred Democrats - he blames everything on the "past 8 years of Republican greed"... how long can you use that excuse? What, did Gov Lynch JUST take over? How long have the Democrats been in power in NH? Keep em coming...
- Joe, Manchester
Gary, I am also against any and all raids on the retirement funds. Investments rise and fall (pretty much just fall lately!) but any raid on those funds which are held in trust should not be tolerated. I would go further and at some point make those funds owned by the specific retiree so they can't be touched.
I still don't like earmarks but this isn't a political direction of tax dollars, it is a raid on private funds. It is exactly the same as if the government took $100 million from your insurance company because they were having a good year
- Charlie Arlinghaus, Canterbury
Hey, they are just taking their queue from Washington. Take whatever you want for anything you want. Hope the insurance industry takes them to court and they lose badly. Otherwise this sets a very bad precedent.
- Bob H, Londonderry
Charles M. Arlinghaus, I thought you did not like "ear marks". Now, are you saying that this one is o.k. and should be kept? Or is that you simply do not like the idea that government could raid it?
Public sector workers' retirement funds are being raided, why aren't you against that? Those funds are privately invested via the retirement system but have diminished because of the private sector's greed to make money for themselves.
- Gary L. Kerr, Chichester
This is not state money and the criminals in state government stealing private funds need to be impeached. If the state can steal this money from this private fund then they can also do this to us.
- Jim, Newport
What the governor is trying to do is make up for eight years of unconscionable greed and irresponsible spending by conservative Republicans. He is trying to be responsible about it but that just isn't possible. You people have run this country to the edge of the cliff and now you are screaming that we are going over the cliff and NO NO NO NO don't stop us we have learned to depend upon government hand outs, no bid contracts and phony accounting to make our billions. Besides which, he has tied his hands with the PLEDGE which is the crutch for the financially dishonest. Charlie, how about if you go back to pondering your non-existent housing bubble? Perhaps a long talk with George Will about fact checking might help
- Robert, Deerfield
Our newly elected officials and those reelected should step back and say 'No Thanks'. Those who vote to do this and take this money should be held accountable in the 2010 elections and not be reelected. Such irresponsibility has no place in our governments or society. Shame on Gov. Lynch for even the suggestion, all the while wanting to cut programs like Reading Recovery that helps children in our schools learn and grow. How much more is the people of New Hampshire willing to sell out and destroy the NH Advantage? Hopefully people will not be fooled anymore and call upon their representatives and sentators to stop this greedy act towards a privately funded insurance pool administered by a private company. Act now not later....
- Robert M Tarr, Manchester
In other words, it's a case of "We need more money to buy the things we want, but we don't have any, so we're taking yours instead."
I'm pretty sure that constitutes theft by almost any definition.
- Kevin, Lancaster
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