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 Monday, July 21, 2009
JUA trustees tell Belknap judge state
’
s takingof $110M
‘
surplus
’
puts their solvency at risk
by Michael KitchLACONIA
 — 
Policyholders, includingLRGHealthcare,
challenging the state’s effort to
drain $110-million from the New HampshireMedical Malpractice Joint UnderwritingAssociation (JUA), to balance its budget, got somesupport from the association itself at a hearing inBelkap County Superior Court yesterday.For the first time since the litigation began, theJUA, which earlier declared its neutrality, enteredthe fray. Attorney Michael Aylward of MorrisonMahoney of Boston, counsel to the association, saidthat the association took no position on the claimsof the state and the policyholders. However, hestressed that taking $110-million from the JUAcould put its future operations and solvency at risk.House Bill 2, the so-called companion bill to thestate budget, stipulates that the funds must betransferred not later than July 31 to ensure that $65-million can be applied against a projected deficit inthe fiscal year that ended on June 30 this year andthe balance divided evenly between the next twofiscal years. Just days before the Legislatureadopted bill, nearly a third of the 900 policyholdersof the JUA brought suit. They claim they areentitled to any funds in excess of monies required todefray pending and projected claims and to payoperating expenses. HB-2, they charge, representsan unlawful and unconstitutional violation of theirvested contractual rights.Judge Kathleen McGuire opened the hearing bysaying that the only question before the court waswhether HB-2 was constitutional. If the stateprevails, she noted, the money would be transferredto the state treasurer as the bill specifies. On theother hand, she said that if she rules for thepolicyholders, she will not order the funds to bedistributed, implying that the management of thefunds would be left to the board and management of the JUA.McGuire assured the parties that she would issueher order by July 31. Kevin Fitzgerald of NixonPeabody, representing the policyholders, andAssociate Attorney General Anne Edwards bothsaid they would appeal an order made against themto the New Hampshire Supreme Court.The JUA was established in 1975 under a statute(RSA 404-C) authorizing the insurancecommissioner to create so-
called “mandatory risk 
sharing
 plans” to provide any form of liability
insurance for which there is no private or voluntarymarket. It is managed by a board of directorsaccording to rules written by the InsuranceDepartment and approved by the Joint LegislativeCommittee on Administrative Rules. About half of the approximately 900 policy holders arephysicians. LRGHealthcare, is the lone hospitalgroup insured by the JUA while other policyholders include more than 20 nursing homes, homehealth agencies and individual nurses,
 physicians’
assistants, podiatrists, chiropractors andoptometrists.Altogether the policyholders represent less than10-percent of the 11,000 health care providers in thestate and pay $8.8-million in annual premiums, ormore than 20-percent of the $40-million in totalmalpractice premiums.The JUA meets its losses and pays its expensesfrom the premiums paid by policyholders. The stateneither funds nor guarantees its liabilities orexpenses. But, all insurance underwriters doing
 business in the state are “members” of the
association and in the event it suffers a deficiencycan be assessed to overcome the shortfall.On the other hand, if there is a surplus, that is if 
 premiums “exceed the amount necessary to pay
 
losses and expenses,” the rules provide either that
 assessments will be refunded to members or that
“the board shall . . . distribute such excess to
those
of 00

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