Local Government Center Still Doesn’t Get It

Here’s part of a press release from the Local Government Center (LGC) dated November 20, 2012:

In addition to the restructuring, the following other actions were taken by the LGC Board of Directors, the new HealthTrust Board of Managers and/or the new Property-Liability Trust Board of Managers to comply with the Order:

• Waiver of the requirement for membership in the NH Municipal Association (NHMA) in order for local governments to have access to the risk pools. 
• Approval of the purchase of Reinsurance by HealthTrust (including the associated required payments for the NH Health Plan--NH’s High Risk Pool, and the NH Vaccine Association). The cost to LGC and its members is $5,014,996 for the next 12 months. 
• The proportional assignment of the ownership and governance of LGC real estate to the risk pools, based on the Order. 

It’s not so much what they say, as what they don’t say. Notice anything missing?  That’s right there’s no mention of the $53 million they are ordered to return. While the LGC would like you to believe they are in compliance with Donald Mitchell’s (the hearing officer) Final Order, they aren’t.

The LGC would also like you to believe that they are holding out an olive branch to the Bureau of Securities  Regulation (BSR), in the hopes of mediating the Final Order. The fact of the matter is that the LGC’s opportunity to mediate this case was before it was heard. 

How does the BSR go about mediating and revising the Final Order, without going back to the hearing officer to sign off on it? And even more importantly, it is no longer in the hands of the BSR. The Attorney Generals office has been the counsel of record for the state, since the LGC decided to appeal this case before the New Hampshire Supreme Court.

Back to the $53 million. A significant portion of the money that has been ordered to be returned is what has been referred to as a ‘loan’ from the Health Trust to the Property Liability Trust. Here’s what the hearing officer Donald Mitchell had to say about that ‘loan’ in his final order:

The Local Government Center Property Liability Trust, LLC, however it may be organized in the future, shall re-pay the $17.1 million subsidy to the Local Government Center Health Trust risk pool management program, however it may be organized, no later than December 1, 2013. 

And here’s the interesting stuff. The LGC originally took the money from the Health Trust and transferred it to the New Hampshire Municipal Association (NHMA). 

(The LGC required all those who participated in their HealthTrust to join the NHMA. This was ruled to be contrary to RSA 5B, the state law that governs pooled risk management programs. The LGC can no longer require a group to join the NHMA in order to participate in their Health Trust.)

From the NHMA the money was then transferred to the Property Liability Trust. It wan’t listed as a loan. It was listed as a payment from the NHMA. To be fair, Maura Carroll (the executive director) at a board meeting recommended that the funds to the Property Liability Trust that originated from the Health Trust be listed as a loan. They did not take her advice. 

But even if they did, there’s still a problem. If the Health Trust has $17.1 million to loan isn’t that surplus and not reserves? And if it is surplus isn’t it supposed to go back to those who participate in the trusts? You bet it is.

I think that at some point the LGC put their own self interests ahead of their obligations to the municipalities and government agencies they are allowed to provide services for. 

RSA 5-B:1 states in part:

The purpose of this chapter is to provide for the establishment of pooled risk management programs and to affirm the status of such programs established for the benefit of political subdivisions of the state.

The LGC has pissed away $1.9 million dollars fighting this case. And it is only going to get more expensive as they continue to refuse to carry out the hearing officers Final Order. Prudence would have the LGC looking for a way to minimize your losses at this point. And good judgement would have them remembering why the legislature allows risked pool management programs to exist and who is allowed to benefit - from these pools - under state law.