Harvey Mackay
On New Year’s Eve, 1999, Normand G. Benoit wasn’t cutting out early to attend a millennial party. He was in court, on behalf of Rhode Island doctors. That Dec. 31, Benoit, a lawyer for the Providence firm of Partridge Snow & Hahn, was filing a petition in Superior Court in Providence on behalf of the state Department of Business Regulation. Eleven days earlier, on Dec. 20, the state of New Hampshire announced it would seek to liquidate Tufts Health Plan of New England Inc., the New Hampshire-based health insurer that served Maine, New Hampshire, and Rhode Island.
Back on Nov. 22, the state of New Hampshire had placed the insurer into rehabilitation, after it was determined that its parent company, Tufts Health Plan of Massachusetts, could no longer subsidize Tufts New England’s losses. The state tried to sell the company, but no buyer emerged.
The court granted the state’s request, and made the liquidation effective Jan. 3. As of Feb. 2, Tufts Health Plan of New England’s coverage obligation would end.
Knowing that the liquidation was imminent, Benoit and the department set out to make sure the Rhode Island doctors who accepted Tufts health insurance got their share of the assets. But the state of New Hampshire and the state of Rhode Island disagreed on the best way to do that. The story of how the problem between the states was resolved has gone relatively unnoticed amid the attention given to the health care crisis in Rhode Island, highlighted by the decision by Harvard Pilgrim Health Care of New England to pull out of the state.
Unlike New Hampshire and Maine, Rhode Island required Tufts Health Plan to place three deposits with the state as a condition for doing business here. The first, for $1,280,000, would cover Rhode Island health care providers; the second, for $150,000, would cover the costs of putting the company through receivership and liquidation; and the third, $100,000, would cover enrollees in the plan.
Soon after the New Hampshire Insurance Department filed its Dec. 20 petition to liquidate the health insurer, the department asked the state of Rhode Island to forward the deposits it held to New Hampshire, so that the Granite State could use the deposit money as part of its management of the liquidation.
Rhode Island demurred. The assets, the state asserted, were there to protect Rhode Island, not Maine or New Hampshire. Therefore, the state filed a petition that Dec. 31 for appointment of an ancillary receiver, allowing the state to keep the deposits.
”When we saw that was going to be their position, we decided to move quickly,” Benoit said.
The case was heard in Merrimack County Superior Court in Concord, N.H. And on Jan. 14, Presiding Judge George L. Manias issued a ruling – in favor of Rhode Island. The judge made state Department of Business Regulation Director Thomas Schumpert the ancillary receiver in charge of the deposit money – which originally had been held by the state general treasurer.
In the process, Rhode Island doctors received priority status for the claims that were owed to them for services rendered during the liquidation period, Jan. 3 to Feb. 2. This means that Ocean State doctors will share equally in the moneys that are being dispersed for services performed during that time. Doctors in all three states will be reimbursed 100 cents on the dollar for those claims, officials said.
But that might not have been the case in Rhode Island had the state not asserted its claim to the deposits, Benoit said.
For example, the state of New Hampshire could have taken Rhode Island’s deposit money and used it to pay Rhode Island’s share of the first set of claims – those that occurred during the liquidation period of Jan. 3 to Feb. 2 – instead of giving Rhode Island an equal claim, along with Maine and New Hampshire, to the liquidation moneys that were going to be used to pay those claims.
If Rhode Island had been forced to rely on its deposits for that first set of claims, its doctors could have come up short if the deposits were insufficient to cover them, Benoit said.
But because Rhode Island won its petition to keep the deposits, Benoit said, it will be able to use that money to satisfy unpaid claims for services rendered before Dec. 20, the day that New Hampshire filed to liquidate Tufts New England. Therefore, Rhode Island will not be punished for protecting itself with deposits.
“We explained to the New Hampshire regulators that we would be cooperative, which we are,” Schumpert said. “We felt we would be serving Rhode Island better if we kept the deposits we required.”
The court ruled that, “you can’t have a special deposit state end up worse than a non-deposit state,” Benoit added. “Under what they were proposing, our people in Rhode Island could have ended up worse than the providers in Maine or New Hampshire.”
On Nov. 22, the day Tufts New England was put into rehabilitation, the health plan had 145,000 members in the three states. Its failure affected 5,000 people locally.
Now, New Hampshire officials are attempting to get enough money out of the liquidation process to pay doctors for the services they gave before Dec. 20. Doctors in the three states have until July 10 to file claims. After all the claims come in, it will be possible to determine how much money is owed to doctors in each state, Benoit said.
Rhode Island will use its deposit money to cover those claims. If the state has money left over after the Rhode Island doctors have been paid, the remaining money will go to the state of New Hampshire, officials said.
The numbers Tufts has provided to Rhode Island so far suggest that the state should have enough money stored to pay the claims, Benoit said.
”Based on preliminary and tentative numbers, we anticipate (that) the deposits should be sufficient to cover the Rhode Island providers in full,” he said.
But if Rhode Island doctors are still owed money even after the deposits are spent, the state has yet another safety valve, Benoit said. As a condition for allowing Tufts New England to operate in Rhode Island, the state required Tufts Massachusetts to guarantee the obligations of Tufts New England. Therefore, Rhode Island doctors will be paid in full, even if the state’s deposits are insufficient.
Schumpert said Tufts Massachusetts has indicated that it intends to honor the guarantee.
New Hampshire Insurance Commissioner Paula T. Rogers said doctors are now being paid for the services they rendered during the liquidation period. Some $12 million has already been paid out, she said. She added that while the first group of claims will be paid fully, she does not expect that the state will have enough money to reimburse 100 cents on dollar for the second group of claims, those issued for services before Dec. 20. The state now seeks to find new moneys, through litigation and other means, to offset those claims, Rogers said.
