Charlie Arlinghaus- The state has illegally taken private property, which is scary

By CHARLES M. ARLINGHAUS

The fight between the state government and a medical malpractice cooperative known as the Joint Underwriting Association (JUA) is more important than any tax hike or spending decision the Legislature has considered this year. It is a fundamental contest over whether the government can change the rules and seize private property when it wants or if the state is subject to the rule of law.

The budget as passed and signed takes $110 million from the JUA. The JUA is an agreement governed through a contract set up in administrative rules. The rules amount to bylaws for the organization and a contract for those purchasing insurance through the cooperative.

The state doesn't pay into the fund and doesn't share in the risk or reward. Instead, doctors and other providers pay a premium and the fund operates as a mutual insurance company, perhaps as your car insurance does.

Rules governing the premium stipulate that any loss or additional expenses will be made up by the membership. If the premiums are not enough to pay charges, "assessments to pay for any deficiency shall be levied as frequently as the board deems necessary." Taxpayers are not on the hook for anything because the entity functions as a private company.

There have not been deficiencies, so the fund has built up a large surplus. This happens with my car insurance as well. Each year, the insurance company sends each of us a check that totals our share of the amount by which premiums exceeded expenses. This isn't a windfall. It is part of the business arrangement I have with the insurance company. It's one of the benefits of mutual insurance.

The JUA cooperative operates in precisely the same way. The agreement contemplates a potential surplus and requires that it be disposed of in only two ways. The JUA board of directors must either apply it against future assessments or "distribute the excess to such health care providers covered by the association as is just and equitable."

There is no provision to do anything else. In fact, the notion that premiums will be adjusted through additional assessments or refunds of excess collections is an important part of any mutual insurance plan. I know when my premium is set that this safeguard is there. The company may set the rate cautiously, knowing that the excess will come back.

The state government wishes to take the accumulated excess, currently held in reserve, and commandeer it for the general use of government. Those who want to take the money make it seem so sensible because they don't mention the provision in the laws of the organization that require it be sent back to the providers who were overcharged.

Neither of the two public explanations for the attempted seizure of funds mentions the obvious sticking point. The Attorney General's Office wrote a nice memo in February outlining a rationale the governor could use in his budget address when he proposed this. It seemed sensible only because it left out the clear language of the agreement mandating a distribution to providers. That language changes everything and can't be easily explained away.

Similarly, the insurance commissioner has written this week (his column is printed on the opposite page) that the money belongs to all of us. He too neglects to mention what the rules clearly and unambiguously state. He calls it a "state-sponsored plan," but it isn't. The state spends no money and assumes no risk. There is no state sponsorship whatsoever. A provision of the law exempts the JUA from the premium tax, but no one has made any attempt to change that, nor is there anything stopping us from changing that exemption going forward. Nonprofit corporations such as the JUA are not "state-sponsored" simply because they have a different tax status.

He asserts that "the law does not give them the right to a windfall." On the contrary, the law clearly gives them and only them the right to excess premiums, just as my insurance policy gives me the same right.

The commissioner rises to grandiose heights of populism when he proclaims "the people of New Hampshire established the JUA, and they deserve to benefit from it." It sounds nice, but that's not actually the case. We didn't do anything. We didn't put up any money. We didn't assume any risk. There is no definition of the word "deserve" that applies to us.

Prior to this year's budget mess, no one in any part of state government ever thought the state had the authority to seize this money. It was considered someone else's property. It still should be.

Charles M. Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free-market think tank in Concord.