Stealing money from the JUA: The saga continues

The Insurance Department recently held a public hearing on proposed new rules for the New Hampshire Medical Malpractice Joint Underwriting Association, known as the JUA.These new rules, if ultimately approved by a joint legislative committee, would permit the commissioner of Insurance to take the more than $110 million of surplus funds from the JUA rather than return them to policyholders as required by 23 years of contracts and the applicable regulations.Does this sound familiar? It should. Last year, the governor and Legislature tried to do the same thing with the enactment of House Bill 2. A coalition of more than 300 health-care providers — doctors, nurses, hospitals — successfully sued the state to stop this raid and won. The Supreme Court held that state’s efforts to take this money was an unconstitutional impairment of the policyholders’ contractual rights.The policyholders won. The politicians in Concord lost. Most people thought this was the end of the issue. Unfortunately, a sequel to the attempted theft is now under way.Armed with spurious new rationales and unchastened by their thorough previous defeat in the courts, the governor and his commissioner have cooked up another scheme to deny policyholders their vested rights in the JUA surplus funds. This time, they are trying to change the rules of the JUA to put the commissioner, rather then the JUA board of directors, in charge of the surplus funds with the authority to pay the money to the state. The fox would now officially be guarding the henhouse.Every 5-year-old child understands that you cannot change the rules of a game after it has been played to achieve a different outcome. That is what these misguided public officials are trying to do. Despite clear obligations in our New Hampshire Constitution, and applicable statutes, regulations and contracts to protect the rights of policyholders, the governor and insurance commissioner are trying to change the rules so they can take something that does not belong to them — the policyholders’ money.The most recent “justification” for the proposed rules changes is the claim that the JUA will not qualify for federal tax-exempt status if the Supreme Court’s decision is obeyed and the contracts and regulations are enforced according to their terms and policyholders are paid the surplus funds to which they are entitled.There is no basis for this position. The policyholders have retained and are working with an international accounting firm with direct experience on this issue. This firm disagrees with the state’s position.Moreover, to follow the state’s “reasoning” through to its logical conclusion, the insurance commissioner and governor believe that it is permissible to ignore the Supreme Court’s order, breach the insurance contracts, forget about the applicable regulations and disregard the vested rights of policyholders in order to preserve retroactively a tax exemption. A curious, indeed monumentally unlawful (and erroneous), position. In fact, even if this purported justification were genuine, it would necessarily mean that the JUA — with the oversight and approval of the insurance commissioner — was issuing fraudulent insurance contracts, under regulations that didn’t mean what they said, for the past 23 years promising phantom benefits that were never possible given the claimed tax exemption. A curious position to say the least for public officials who swore an oath to uphold the law and defend the state’s constitution.When private parties engage in this type of behavior, they are prosecuted or sued for fraud, deceit, unfair and deceptive trade practices and on occasion even racketeering. The only difference between this attempted theft by our governor and insurance commissioner and a masked gunman holding up a convenience store is that the gunman offers no pretense of what he’s doing.Kevin M. Fitzgerald, W. Scott O’Connell and Gordon J. MacDonald are attorneys with Nixon Peabody LLP in Manchester and represent JUA policyholders.