Final Local Government Hearing for Public Comment

I took some time from campaigning today to attend the legislative committee meeting on the Local Government Center.

Michael Coutu testified before the legislative committee looking into the problems of the Local Government Center and its Trusts. 

Here’s what Tim Buckland from the Union Leader wrote about Coutu:

An expert in the insurance and finance fields who made a career of helping failing insurance companies was twice brought to the New Hampshire Local Government Center to help its struggling Property-Liability Trust make good on looming payments that threaten to send the public property insurance administrator into financial insolvency.

Each time, members of various LGC boards of directors sent Michael A. Coutu, who had the backing of the Secretary of State’s Office and a plan to get the struggling public insurance administrator out of trouble, packing, he said.

“I was dismissed as a misbehaved schoolboy who had been summoned to the principal’s office for misdeeds,” Coutu said. “Yet I held in my hands the key that would get PLT out of financial distress.”

And here’s what is becoming more apparent at each subsequent committee hearing. Had the LGC and their various Trusts listened to Coutu, this case would have been settled long ago. Instead the LGC continues to pursue an appeal in front of the New Hampshire Supreme Court. They have hired at least two more lawyers from two separate firms with expertise in bankruptcy, all the while claiming they have no plans for their Property-Liability Trust to file for bankruptcy.

Right from the start of the hearings Senator Forrester appeared to challenge Coutu’s credentials. You remember her. She’s the Senator that Peter Bragdon (former Senate President) appointed to this committee after he decided to take the job of executive director for the LGC.

Coutu who is now consulting for the Bureau of Securities Regulation (BSR) was a knowledgeable witness who explained each point he made in terms even I could understand. There were 7 main categories he addressed and they had 38 subcategories. Each point was explained and examples were given to reinforce his answers.

The main points he covered were:

Written documentation and public notice of By Laws and Policies

Policies - The big one here is no transfer of funds or anything of value between the Trusts without fair value compensation. Remember the $17.1 million gift to the workers comp program from the Health Trust.

Lobbying - Risk pools should not be required to join the lobbying arm of the former LGC, (the New Hampshire Municipal Association - NHMA) and should not have any of their funds used to pay for lobbying.

Governance of the Trusts - No sharing of Board members. No sharing of executives. The ability to hire outside experts at the Board’s discretion. And very importantly the establishment of an independent audit committee.

Best practices - Bring their long term investments into compliance with state statutes. No exclusionary agreement with Anthem or any other insurer. No post employment  within  two years of leaving the Risk Pool. The CEO and CFO must sign off on and be responsible for the Pools financial statement.

These are just a few of the issues Coutu discussed with the Committee. But the 500 pound gorilla in the room continues to be should the Secretary of State’s (SOS) office or the Insurance Department have regulatory authority over Risk Pools.

Coutu was very clear in his testimony that the role of oversight should stay with the SOS and their Bureau of Securities Regulation Division. Coutu cited a number of reasons why, but I feel the most compelling reason (even taking into account Senator Forrester's penchant to have the Insurance Department oversee Risk Pools) is that Risk Pools are not insurance companies.

Risk Pools only exist to provide an organizational structure for public entities (towns, school districts safety agencies) to pool together to buy insurance from an insurance company at reasonable rates. 

The sole purpose of the Risk Pools as defined in RSA 5:B:

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 risk pools are not insurance companies. Regardless of how they have acted in the past and regardless of how they view their role, the statute is clear. 

The committee will meet at least twice more to draw up a report that may possibly lead to additional legislation to regulate the State’s risk pools. It is my opinion that the committee is leaning towards a conservative approach in regards to crafting new laws and may well wait to hear what the Supreme Court has to say regarding the hearing officer’s administrative order.

Here’s the legislative committee’s web page:

http://www.gencourt.state.nh.us/statstudcomm/details.aspx?id=2121&rbl=1&txtbillnumber=hb283

To get to the reports, minutes, etc., follow the 3 red arrows and click on the Committee Web Page.