Challenge to N.H. medical liability fund holds up payments

The state attorney general questions a settlement by physicians and fund officials over surplus money.

By Alicia Gallegos — Posted Oct. 3, 2011

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Despite a nearly three-year court battle and a state Supreme Court decision, a dispute about surplus cash in New Hampshire's medical liability fund continues.

State Attorney General Michael Delaney is challenging a proposed settlement between the New Hampshire Medical Malpractice Joint Underwriting Assn. and its policyholders. Delaney does not approve of how the $110 million settlement will be allocated, particularly the 25% of the funds that will go toward policyholders' attorneys fees. The settlement must have legislative approval before moving forward, Delaney said in a Sept. 9 letter to state lawmakers.

But attorneys for policyholders say Delaney has no authority over the settlement because the JUA is not a state entity.

"The attorney general has interfered at the eleventh hour. We don't believe the state has any right to be getting involved" with the settlement, said New Hampshire dermatologist Georgia A. Tuttle, MD, one of the plaintiffs. Dr. Tuttle also is a member of the American Medical Association Board of Trustees.

The state created the JUA in 1975 as an alternative source of affordable liability insurance, with funding from annual premiums that physicians, hospitals and others pay to purchase coverage. New Hampshire doctors sued the state in 2009 over a state law authorizing the transfer of $110 million from the liability fund to the state's general fund. The money was earmarked for expanding state health care programs for underserved populations.

In 2010, the New Hampshire Supreme Court ruled in favor of the doctors, finding the law unconstitutional. Physicians then sued the JUA for failing to protect and defend the interests of the fund's policyholders. A settlement was reached in August, and the deal was moving toward a court review, said Kevin Fitzgerald, an attorney for policyholders.

Delaney's opposition to the settlement is preventing New Hampshire doctors from being paid what they are owed, Fitzgerald said. State lawmakers in June approved legislation preventing the state from making any future withdrawals or transfers from the JUA. Any surplus funds belong to policyholders, lawmakers said.

"It's the policyholders' money, and it must be given back," Fitzgerald said.

At this article's deadline, Delaney's office had not responded to several messages seeking comment.

A spokesman for Gov. John Lynch said the governor's office had concerns about the proposed payment to attorneys from the settlement.

"It's an outrageous amount," spokesman Colin Manning said. "We think the people of New Hampshire would be outraged to know money is going to private attorneys that could have been used for services for the needy or children's services."

Fitzgerald said the amount of money that would go to attorney fees would be decided by the State of New Hampshire Superior Court. The proposed 25% figure is far below the standard cost for legal representation in such cases, he said.

The JUA would like to settle the case, but it disagrees with policyholders about whether the association is a state entity, said Daniel Mullen, attorney for the JUA. The settlement cannot move forward without Delaney's approval because the association is part of the state, Mullen said. If the Internal Revenue Service determines that the JUA is an entity separate from the state, the association could be subjected to back taxes.

The latest battle is frustrating to doctors, who have been waiting years for a resolution, Dr. Tuttle said. "There are multiple costs to physicians, not only the physical expense, but the emotional expense, of fighting the same battle again and again."

At a Sept. 23 hearing, the Superior Court gave the state 20 days to submit an official position on the settlement issue. A ruling is expected by Oct. 24.

Similar dispute resolved

In a similar case, Wisconsin lawmakers have reached a final resolution in the repayment of more than $200 million taken from the state's medical liability fund. (See correction)

In 2007, legislators transferred money from the Injured Patients and Families Compensation Fund, saying the funds were needed to pay for other state health care programs. The Wisconsin Medical Society argued that the transfer amounted to an illegal tax on doctors.

A Dane County trial court sided with the state in 2008. The medical society appealed. Appellate judges, without addressing the merits, sent the case to the state's high court.

In a July 2010 opinion, the Supreme Court of Wisconsin ruled for policyholders, saying health professionals have a "constitutionally protected property interest" in the fund. The court ordered the money to be repaid. In May 2011, Wisconsin lawmakers introduced legislation that included a mandate to repay the fund.

On July 20, a judge approved a repayment of about $234 million, which includes interest. (See correction)

"We are extremely pleased that the state has agreed to make the Injured Patients and Families Compensation Fund whole in the next three months rather than extending the obligation into 2012," said Wisconsin Medical Society President George M. Lange, MD. "The integrity of the fund and the stability of the state's medical liability system benefit all Wisconsin patients and physicians."

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