JUA dispute nears an end with new legislation

The long-running dispute over the surplus funds of the New Hampshire Medical Malpractice Joint Underwriting Association will likely be settled by legislation.As expected, Sen. Sharon Carson, R-Londonderry, has filed a bill – Senate Bill 170 – forbidding the state from taking any funds held by the JUA and prescribing a procedure and schedule for addressing any federal tax liability and distributing excess funds to policyholders.Carson said that her bill, which is co-sponsored by the Republican leadership of both the Senate and House intends “to clarify that the JUA is a private fund and its money is not ours to touch.”The bill will be heard by the Senate Executive Departments and Administration Committee, beginning at 9:50 a.m. Thursday, Feb. 10.In 2009, on Lynch’s recommendation, the Democratic-controlled Legislature included the $110 million surplus in the 2010-2011 budget. Policyholders, led by LRGHealthcare of Laconia, challenged the state’s claim, insisting that the rules governing the JUA and their contracts with it granted them a right to a share of the surplus.In January 2010, the New Hampshire Supreme Court upheld the right of the policyholders. However, the administration declined to comply with the decision and instead sought to rewrite the rules of the JUA in order to transfer its surplus to the state coffers.Twice the Joint Legislative Committee on Administrative Rules rejected the proposal. When the Legislature convened earlier this month, Rep. Betsey Patten, R-Moultonborough, a longtime member of the committee, introduced House Joint Resolution 2 — co-sponsored by the Senate President Peter Bragdon, R-Milford, among others — prohibiting implementation of the rules over the objection of the committee. Last month, Insurance Commissioner Roger Sevigny formally withdrew the proposed rule.Henry Lipman, executive vice president and chief financial officer of LRGHealthcare, said that “the legislation puts into law what the Supreme Court decided.” He said that LRGH has participated with other policyholders in seeking a legislative solution to the dispute and will support Carson’s bill.LRGH was a policyholder of the JUA from 1986 until 2010. However, last month LRGH left the JUA to join Concord Hospital, Eliot Health Systems of Manchester and Wentworth-Douglas Hospital of Dover in forming Granite Shield Insurance Exchange, a reciprocal captive insurance company licensed in Vermont, which will insure the institutions and their employees against general and professional liability.Since the JUA was established in 1985, it has enjoyed a tax-exemption on the understanding that it is an integral part of the state. Doubt was cast on its tax status in the course of litigation, when Superior Court Judge Kathleen McGuire ruled that the JUA was not a state agency.Ever since, attorneys for the state have insisted that if the JUA distributed surplus funds to policyholders, it would forfeit its tax-exempt status and could be required to pay back taxes with penalties and interest. Attorneys for the policyholders have countered that that the state is exaggerating the risk.SB 170 would direct the directors of the JUA, together with the insurance commissioner and a representative of the policyholders, to approach the Internal Revenue Service and settle any outstanding federal tax liability the JUA may have.Within 30 days of satisfying any federal tax liability, the JUA would be required to calculate the excess surplus funds remaining and within another 60 days allocate them among all policyholders from 1986 to 2010. — MICHAEL KITCH/LACONIA DAILY SUN/FOR NEW HAMPSHIRE BUSINESS REVIEW