Scanlan says 2 municipal risk pools in danger of 'insolvency'
Mar. 4—Secretary of State David Scanlan asked the Legislature to give his office sweeping new powers to regulate the finances of risk pools that manage health and property insurance for cities, towns and school districts after concluding two of the providers were "in danger of insolvency."
But executives with those two risk pools with the most losses, HealthTrust and the New Hampshire Interlocal Trust (NHIT), told two state Senate committees Tuesday that Scanlan's solution to set a minimum floor and maximum cap for how much these firms can hold in reserves was too low and wouldn't be financially responsible.
In 2010, the Legislature gave Scanlan's office authority to regulate the companies that give local governments a lower-cost option to manage and pay out insurance claims for them rather than a small town or city having to self-fund its own coverage.
"Too often we see government failure when some event occurs that is pretty tragic and people are pointing fingers on who is responsible and how," Scanlan said.
"Unfortunately, the reason for this bill is two of the risk pools are in danger of insolvency. It's that simple. They were not following actuarial advice."
Senate President Sharon Carson, R-Londonderry, agreed to author a late-filed bill (SB 297) on Scanlan's behalf.
"This will go a long way to protecting the taxpayers, political subdivisions and their active and retired employees," Carson told the Senate Finance and Election and Municipal Affairs Committee meeting jointly to hear the matter.
The pools are tax exempt and do not have to comply with the costly regulations imposed on commercial insurance companies.
Scanlan's predecessor, former Secretary of State Bill Gardner, asked lawmakers to put his office in charge after accusing the pools of overcharging local governments and building up massive surpluses instead of providing refunds.
Fifteen years later, Scanlan said the two programs have run into near financial ruin for the opposite reason, under-charging member towns or school districts in order to hold onto their business in what's become a competitive market.
Hua Li is Scanlan's lead actuary and the owner of the Complete Actuarial Solutions Company (CASCO) in McLean, Virginia.
Li said Health Trust, by far the largest of the pools, has lost money in five of the last seven years and is losing $2.5 million a month.
"At the $2.5 million rate, they are likely down to about 15 days of cash and reserves near the end of the year and that's for a $500 million a year plan," Li said.
Other pools in better financial shape
The other two risk pools — Primex, which provides casualty coverage, and School Care, which specializes in insurance for educators — are in much better financial shape than Health Trust and NHIT, Li said.
Carson's bill would allow the risk pools on their own to levy an additional assessment of local governments to build up reserves to avoid insolvency.
If they didn't take such action, the legislation would give Scanlan the right to go to a Superior Court judge and ask that a receiver be appointed to mandate higher assessments.
Starting in 2028, the pools would have to have between 16% and 20% of their total value in reserves.
Health Trust Executive Director Scott DeRoche said all its reserves totaled more than 20% before huge losses hit in 2023-24.
DeRoche said those losses were because the medical trend estimate of an 8-9% increase in health spending amounted to more than 20%.
He denied his pool intentionally underpriced its premiums to keep domination in the market for the company that represents 191 municipalities, six counties, 85 school districts and 74 other entities like water districts.
The group has taken several steps to improve its profit loss statement including an end to some expensive benefit offerings, he said.
Scanlan's bill would be an unconstitutional mandate on local governments, making cities and towns face higher taxpayer costs to follow these new requirements, DeRoche said.
The 16% floor for reserves would be $20 million lower than it should be, according to Health Trust's own actuary, he added.
Jeff Reardon with the N.H. Interlocal Trust also said the 16% was too small a target for reserves.
"We have taken action to build up our reserves and that should be in good order within three to five years," Reardon said.
Last August, Scanlan sent a cease and desist letter alleging NHIT engaged in "unlawful practices" that included the claim it had set "not to exceed rates" to win over new business.
"This disparate treatment creates 'winners and losers' among political subdivisions," Scanlan wrote at the time.
klandrigan@unionleader.com
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