On May 24, 2010, the New Hampshire Insurance Department proposed changes to the regulations governing the New Hampshire Medical Malpractice Joint Underwriting Association (“JUA”). These proposed changes are the latest in the ongoing struggle for control over the funds of the JUA. What follows is a brief history of the issue, followed by a summary of the changes to the rules as proposed by the Department of Insurance.
History: On June 30, 2009, New Hampshire House Bill 2 was signed into law, directing the JUA to transfer $110 million to the State’s general fund over a 3 year period. Several medical practitioners and providers who held policies through the JUA filed an action in the Belknap County Superior Court asking the court to declare the law unconstitutional. The Court agreed with the policyholders and on January 28, 2010, the New Hampshire Supreme Court issued its decision on appeal affirming the decision. The Supreme Court held that the law retrospectively deprived the policyholders of their vested rights to the surplus JUA funds. It noted that the regulations governing the JUA direct it to apply any surplus to reduce future premiums and / or to distribute the excess to health providers covered by the JUA “as is just and equitable”. The court also held that because the funds were to be transferred to the State’s general fund, the law was not “appropriately tailored” to serve the stated purpose of funding programs for the medically underserved
The Proposed Rules: Following this decision, the Department of Insurance proposed revisions to the rules governing the JUA. Among the changes proposed were several to address concerns raised by the Supreme Court about retrospective rule changes and to address concerns about the tax-exempt status of the JUA. The proposed changes would apply to policies issued after the rule change and do not transfer funds currently being held by the JUA.
- The JUA is declared to be and to operate as an integral part of the State;
- The Commissioner of Insurance (“Commissioner”) will have authority to direct the acts of the JUA Board of Directors, including removing Directors with or without cause;
- The Commissioner or his designee will have 1 seat on the 8 person Board;
- The Commissioner will determine the necessary capital and reserves required for the fund with the input of the Board and an independent actuary;
- The Commissioner has full power to amend the rules governing the JUA at any time (preventing a claim that any rights in the JUA or its funds will vest);
- The JUA will be subject to New Hampshire’s Right-to-know law;
- Any future shortfall in the fund would be paid for by liability insurers rather than policyholders and the expense can be included in the insurer’s rate filing
- Assessments must be deducted from any calculation of surplus;
- Surplus funds will no longer be used to refund to policyholders;
- Any legal representation shall be through the NH AG’s office.
The 1st round of public comments for the proposed rules closed on July 30th. Public hearings were held at which concerned individuals were allowed to express their opinions concerning the rule changes. Comments will be considered and set of final proposed rules will be issued, followed by another round of hearings and comments before the rules will be finalized. A representative for the Department of Insurance said she hopes the rules will be finalized by the end of 2010.
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