Health providers and lawyers compared a proposed Insurance Department rule to a “masked gunman” making off with $110 million meant for state government.At a July 20 hearing in Concord, the department heard only opposition to its rules proposal. The plan came six months after the state’s high court ruled Gov.
John Lynch’s gambit to use the Joint Underwriters Association surplus to balance the state budget violated the contract clause of the state Constitution.Kevin Fitzgerald, lead lawyer for the health providers who successfully sued Lynch over the JUA gambit, said these proposed rule changes are an attempted government theft by another name.“The only difference between this attempted theft by our governor and insurance commissioner and a masked gunman holding up a convenience store is that a gunman offers no pretense of what he’s doing,” Fitzgerald wrote in commentary on the proposal.Insurance Commissioner Roger Sevigny claims changes in rules for the 35-year-old JUA are to protect the group’s tax-exempt status and avoid a $100 million IRS judgment.The high court never ruled if the JUA is a state program, even though the Legislature created it in 1975, Sevigny noted.“These changes will clarify and improve the operation of the JUA and will confirm that the JUA owes no back taxes to the IRS and is tax exempt,” Sevigny countered.Scott O’Connell, another lawyer for Dr. Georgia Tuttle, Laconia-based LRGHealthcare — parent company of Lakes Region General Hospital and Franklin Regional Hospital — and the other providers, said Sevigny is using the tax-exempt threat as a weapon to gain omnipotent power over the JUA and to move its surplus into state coffers.“The tax exemption is total horse hockey; it’s not based in reality,” O’Connell said in a telephone interview. “They want to use this stalking horse with all it can provide them. Every change is calculated to give the commissioner oversight and control over everything.”
‘Prospective’ rules?Chiara Dolcino, general counsel for the Insurance Department, said the rules achieve two important objectives.“First, to provide greater clarity with respect to the structure and operation of the JUA and the responsibilities of the commissioner, the required participants in the plan and the board and to make necessary changes to preserve the longstanding federal tax exemption of the JUA,” Dolcino said in her testimony.But Tuttle offered a similar theft analogy to her lawyers’ in remarks to state regulators about Sevigny’s plan.“In fact, his actions, in my opinion are no different than those of a thief robbing my home, except that when the thief comes into my home, he knows that what he is doing is illegal,” Tuttle said. “This action is action that is being taken trying to make it look like it’s the right thing to do. It isn’t, plain and simple.”Sevigny and state regulators contend the rules would be “prospective” and only give the state access to future surpluses amassed over time.Henry Lipman, LRGHealthcare’s chief financial officer, said the proposed rules go much further than that and state officials know it.“I don’t know how you can say this is a prospective rule, and with all due respect, I think it is a sham to say it’s a prospective matter,” Lipman said.The policyholders will continue fighting the issue when the proposed rules go before the Joint Legislative Committee on Administrative Rules, O’Connell said.He said one argument will be they would violate a New Hampshire law that bans state government from operating an insurance company.“The state would function as its own company running the JUA entirely with the board only being advisory,” O’Connell said. “Be honest with us; we’re not stupid. We know what you are trying to do, and that is keep your options in play to grab these dollars.” - KEVIN LANDRIGAN/THE TELEGRAPH
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This article appears in the July 30 2010 issue of New Hampshire Business Review