A year after crisis, no clear answers for school district risk pools

Members of the Londonderry School Board had barely begun their budgeting process last September when they received a jolt. SchoolCare, the organization that provided the district’s health care, said it had underestimated the cost of claims, and Londonderry owed $2.1 million to fill the gap. If the district didn’t pay the surprise fee by January, SchoolCare would begin denying district employees’ insurance claims. 

The problem was pervasive. Statewide, SchoolCare faced a $30 million deficit. In total, 65 school districts and 25 municipalities received similar letters with similar fees. And SchoolCare was not the only problem: New Hampshire Interlocal Trust, a risk pool serving 17 school districts, issued $2.5 million in surprise assessments to its members and then entered state receivership. 

“This is holding school districts hostage,” Londonderry School Board Chairman Bob Slater complained at the board’s Oct. 8 meeting.

A year later, that initial shock has faded. The majority of affected school districts have paid their fees one way or another: Concord by raising its property taxes 1.5%; Somersworth by announcing staff layoffs; others via hiring freezes. The Secretary of State’s Office announced Wednesday that financial maneuvers during its receivership of New Hampshire Interlocal Trust will allow it to return $3 million to affected school districts and municipalities. 

“We went through a rough patch, and we successfully maneuvered our way through it as best we could,” Secretary of State Dave Scanlan said Wednesday. “There are still ongoing issues … but I think we can see daylight.” 

But bigger questions over how to prevent a future insurance crisis are mired in a state-led enforcement action, a district-led lawsuit, two vetoed bills, and a decades-long debate over how to manage taxpayer money. 

On one side is the Secretary of State’s Office, which regulates the pools and has argued that they should not hold excessive reserves and charge assessment fees if costs rise. On the other is HealthTrust, a risk pool that has argued pools should hold larger reserves to avoid the need for surprise fees. Entering the fray is the Dover School District, which says the surprise fees are unlawful and is suing to stop them in the first place. 

With Gov. Kelly Ayotte, lawmakers, and two state agencies at odds, the disagreement is not likely to fade soon.

An early divide

First authorized in 1987, New Hampshire’s public sector risk pools are designed to help school districts and towns pool costs by effectively self-insuring, rather than seeking commercial insurance plans. Like insurers, the organizations collect annual premiums from member districts or towns and use the pooled contributions to pay small claims. But unlike insurers, the risk pools are exempt from some federal taxes and insurance rules, making them attractive for local governments.

From the beginning, the risk pools have been overseen by the Secretary of State’s Office’s Bureau of Securities Regulation, rather than the New Hampshire Insurance Department. And for decades, that office has clashed with HealthTrust over its approach to the pools — and over how much it should hold in reserve.

Founded by the New Hampshire Municipal Association in 1985, HealthTrust has long provided pooled health and welfare benefits to cities and towns, representing 356 public entities last year. But in 2011, a Bureau of Securities Regulation investigation found the Local Government Center, an umbrella organization over HealthTrust and another pool called the Property-Liability Trust, had mismanaged funds by holding too much in reserve and using those reserve funds inappropriately. The investigation found that some of the premiums paid by schools and towns to HealthTrust had been commingled with funds for the Property-Liability Trust and used to help plug financial holes in the other trust. Those actions, the bureau argued, violated the state statute authorizing the risk pools, which required the pools to return any surpluses to member schools and towns.

The Supreme Court eventually upheld most of the bureau’s enforcement action against HealthTrust in 2014, requiring the risk pool to return $51 million in funds, and leading to the dismantling of the umbrella organization. The New Hampshire Municipal Association no longer operates the organization.

But the legal proceedings presaged a bigger, ideological dispute. As part of its attempted enforcement action, the Secretary of State’s Office sought to require HealthTrust to cap the amount of funds it held to 15% to prevent mismanagement. HealthTrust disputed that demand, arguing that it should be allowed to set its reserves according to its future risk, and the Supreme Court ultimately struck the requirement down. 

A decade later, the idea has persisted. 

A fight over reserves

The near-collapse of multiple New Hampshire risk pools in 2025 has renewed the secretary of state’s efforts to assert more regulatory control over the organizations and kicked off a new round in the broader debate. 

HealthTrust argues its approach was vindicated amid the chaos. While the state’s two other health risk pools, SchoolCare and the New Hampshire Interlocal Trust, issued surprise assessment fees last year, HealthTrust did not; its reserves were sufficient to absorb a spike in health care claim costs. That result suggests HealthTrust’s system worked, argues HealthTrust Executive Director Scott DeRoche.

Key to HealthTrust’s approach is the “non-assessable” model, DeRoche says. The fund has vowed to never hit its members with surprise mid-year assessments to allow predictable municipal budgeting; but to do so, it needs to reserve more money, he argues. 

The Secretary of State’s Office disagrees. Last September, the Bureau of Securities Regulation filed another administrative action against HealthTrust, arguing it was again improperly retaining surplus funds. And in its enforcement petition directly called out the organization’s approach of using reserves to absorb spikes in costs. The bureau argues HealthTrust amassed a war chest by retaining surplus funds, and used that war chest to artificially lower its premiums to compete with other pools and then to cover losses.

“HealthTrust uses what are supposed to be contingency reserves and net assets to subsidize insufficient contribution rates and to support HealthTrust’s deliberate rate stabilization for retention of membership and market share,” the petition, written by Eric Forcier, reads. 

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Instead, the bureau argues, the risk pool should have used better actuarial analyses to more accurately set its annual premiums, refunded any excess, and imposed assessments in the case of shortfalls.  

A hearing for the enforcement action is set for mid-2026; former Republican House Speaker Bill O’Brien has been chosen to preside. 

DeRoche says the state’s attempt is misguided. “Paradoxically, even though … HealthTrust is the only health risk pool in New Hampshire currently not experiencing immediate financial concerns, the Bureau has chosen to initiate an enforcement action against HealthTrust,” he wrote in October in a letter to member schools and municipalities. 

Scanlan disagrees. “When they closed out that fiscal year, they were down to 10 days of operating cash,” he said Wednesday, speaking of HealthTrust. “They were lucky … part of the reason that there’s an enforcement action going against them is that there are governance issues, and they are not forthcoming in terms of being regulated.”

To Scanlan, HealthTrust’s entire operational model is flawed. On Wednesday, he argued against the possibility of “non-assessable” pools. All risk pools must issue assessments if they run out of money, he argued. 

“In the end, the members of that organization are responsible for paying the bill,” he said. “There is no other source of revenue … these entities are not insurance companies. They’re simply pooled money for pooled risk to provide coverage for their members.”

The debate has ballooned beyond administrative actions. Scanlan has publicly lobbied for two bills in the past two years that would cap health care risk pool reserves in state law. The latest, Senate Bill 661, would, in part, require risk pools to hold at least 12% of contingency reserves, but would allow no more than 20%. Under the bill, risk pool organizations would be required to put the extra into a stabilization fund set aside to pay cities and towns directly in financial emergencies. A 2025 bill attempting similar limits, Senate Bill 297, failed to pass a committee of conference. 

DeRoche has been vocally opposed to the limits, arguing a healthy contingency percentage is more like 34%. The bill “prohibits HealthTrust from holding the reserves recommended for long-term stability and sustainability,” he wrote in a March 20 letter to senators. “SB 661 would essentially codify a failed model.”

The New Hampshire Municipal Association also opposed SB 661. Instead, HealthFirst and the association both endorsed a separate bill this year: House Bill 1491, which would have allowed non-assessable risk pools like HealthFirst to be regulated by the New Hampshire Insurance Department using strict actuarial standards, and allow other, “assessable” pools like SchoolCare to continue to be regulated by the Secretary of State’s Office. 

Lawmakers passed both bills. But Ayotte vetoed them both. “SB 661 arbitrarily caps reserves to manage liabilities,” she said. 

She added: “As we have seen from recent risk pool failures, this is an important policy area to get right and these proposals need more work.”

Legal uncertainty

At a press conference Wednesday, Scanlan and others touted the efforts made to repay the $2.5 million in assessment fees issued by New Hampshire Interlocal Trust. That was done in part by using “stop-loss recoveries” — reimbursements from external insurance — and by recouping pharmacy rebates, said Lance Turgeon, the receiver.

But Scanlan also took note of another potential disruption. In April, the Dover School District sued SchoolCare in Strafford County Superior Court, arguing the risk pool’s $1.7 million surprise assessment fee and its threats to halt paying out health care claims if the district didn’t pay were illegal. 

In its lawsuit, the district argued SchoolCare had breached its contract by attempting to deny the claims, and that it did not have the authority to request an assessment fee due to its own financial mismanagement. The district also argued that the organization had attempted to use denial of health care claims as leverage, a form of coercion. 

That month, Superior Court Judge John Curran issued a preliminary injunction requiring SchoolCare to continue paying out the claims, and ruling that the school district was likely to succeed on the merits of its case. While the lawsuit is continuing, the preliminary injunction has suggested the court could rule that the assessments were illegal, raising major questions for the rest of the state.

To other towns and school districts, such a ruling could open the door to receiving welcome refunds on their surprise fees. To Scanlan, it could be devastating to the entire risk pool system. 

“They seem to think that if they don’t pay, there’s some magic source of funding that is just going to appear and cover those costs,” he said. “That simply will not happen because that magic money does not exist.”

But however the court rules, the broader, systemic headaches appear here to stay. 

Back in the October school board meeting, Londonderry Superintendent Dan Black shook his head. 

“The process and how they handled this was terrible,” he said. “Just in general, how we got here was terrible.”