An offshore insurance company operated and funded by the public benefit corporation that runs Nassau County’s only public hospital spent more than $113,000 for travel over the past six years for officials to attend meetings and stay at resorts in the Caribbean including the Cayman Islands, Bermuda and St. Maarten, records show.
The officials attended board meetings of NHCC Ltd., which was established in the Cayman Islands in 1999 and provides medical malpractice insurance for employees of the Nassau Health Care Corp., or NuHealth.
NuHealth, the public benefit corporation that runs Nassau University Medical Center in East Meadow, provides all the insurer’s funding. The offshore company, which has offices in an insurance building in the Cayman Islands, has no employees, and its directors are NuHealth executives and administrators.
Big health care systems such as NuHealth commonly set up such “captives,” which are specialized companies set up to insure employees.
Proponents argue that because the companies aren’t required to keep as much money in reserve as private insurers, the hospital systems can devote more funding to patient care. Captives also help give companies more control in managing their risk.
NHCC Ltd. has reserves of about $30 million. More than half of NUMC patients are on Medicaid and nearly 30 percent are on Medicare.
Although Nassau County no longer operates or subsidizes NUMC, it guarantees more than $202 million of NuHealth’s debt.
Meetings of the two-member NHCC Ltd. board must be held offshore, officials said. Board directors have included NuHealth’s president and chief executive, and other top finance and legal administrators.
The long-standing practice of meeting in the Caribbean came under scrutiny in February, when board chairman George Tsunis took office and called for an end to such trips.
The NuHealth board subsequently passed a resolution stating that only two NHCC Ltd. board members can attend and be reimbursed for “reasonable and customary” travel expenses for one offshore meeting per year lasting one day. The meeting is to be held in a nearby foreign airport , according to the resolution.
“I found that the expenditures were extravagant and inappropriate,” Tsunis, a developer, hotelier and fundraiser appointed by Nassau County Executive Laura Curran, said in an interview.
Tsunis said he would personally approve future trip expenses, “and I will be monumentally stingy in that regard.”
Later this month, two officials will fly to the Toronto Pearson International Airport for a board of directors meeting and return the same day, Tsunis said. “I said, ‘I’m happy to pay for lunch at the airport,’” Tsunis said. “Take your pick: Big Mac or Whopper.”
Since 2012, top hospital administrators took several trips each year for insurance meetings and were reimbursed up to thousands of dollars per trip, according to a review of public records of spending from 2012 through 2017 obtained from NuHealth through a Freedom of Information Law request.
The NuHealth officials stayed at beachside resorts at rates of about $200 to $500 per night, according to receipts. Hotels included the Westin Grand Cayman Seven Mile Beach Resort & Spa and the Fairmont Southampton in Bermuda.
NuHealth provided a spreadsheet detailing more than $113,000 in expenses including airfare, hotels and food and restaurants, and administrative costs incurred by the captive insurer for trips over the six-year period.
Trips took place under Democratic and Republican county administrations.
Minutes show directors of NuHealth’s insurer discussed a variety of financial and legal issues at board meetings in the Caribbean:
- On March 27, 2015, five NHCC Ltd. board directors, including Victor Politi, then president and chief executive of NuHealth, John Maher and the late NuHealth general counsel John Ciotti, met at the Sonesta Maho Hotel, a beach resort in St. Maarten. In a presentation on finances, an insurance manager noted that NuHealth needed to inject additional capital into the insurance company, “as it is currently out of compliance” with insurance law. The board approved the funding of $3.5 million.
- On Nov. 29, 2015, three days after Thanksgiving, Maher, NuHealth’s executive vice president and chief financial officer, and NuHealth official Harold McDonald attended a meeting of the self-insurer at the Westin Grand Cayman Seven Mile Beach Resort & Spa in the Grand Cayman Islands. Officials reviewed topics including the status of insurance claims and the financial position of the company.
- At a Nov. 27, 2012, meeting, attorney Justin Peruski of Honigman Miller Schwartz and Cohn LLP discussed the importance of maintaining an offshore captive. Peruski said a New York State appellate ruling that state courts were able to “exercise long arm jurisdiction over a Cayman Islands captive that insured New York physicians; however, the appellate court specifically ruled that it could not regulate or tax the captive because the offshore captive was not transacting an insurance business in the state.” Peruski, according to minutes, “noted the importance of maintaining company operations offshore to mitigate the risk of state regulation.”
NuHealth officials who took these trips declined to comment or did not return calls for comment.
Many health care companies set up captives during a crisis in the private insurance marketplace in the 1980s, when malpractice insurance rates spiked and in some jurisdictions the insurance became unavailable.
Bermuda, home of the largest number of licensed captives in the world, had 739 in 2017, followed by the Cayman Islands, with 669, and Vermont with 566, according to data published by the Insurance Information Institute.
Policies for travel to offshore self-insurers vary among health systems.
Northwell Health, the state’s largest health system, operates Regional Insurance Co. Ltd., an offshore captive insurance company in Bermuda.
“The board takes one overnight trip annually to Bermuda,” said Dorothy L. Feldman, senior vice president and Northwell Health’s chief risk officer.
“The entity is meant purely to meet the health system’s insurance needs,” according to a Northwell statement.
Michael Zuckerman, an associate professor of instruction at the Fox School of Business at Temple University, is a former consultant to NuHealth who advised on issues related to the self-insurer. He recalled taking about a half-dozen trips to the Cayman Islands and Bermuda beginning in the early 2000s.
Officials “took the meetings there very seriously, and they did a lot of work,” said Zuckerman, a former managing director of Aon, an insurance broker.
Zuckerman said meeting in Canada makes no sense and could expose the captive to Canadian regulations.
“There’s no requirement by the Cayman government to actually meet in Cayman,” he said. “But to me, if you’re not going to meet in Cayman once a year, then you should shut down your captive, because that’s really management negligence in my opinion.”
Zuckerman said Tsunis was “raising some good, valid concerns: Does the captive have to be in Cayman — [it] sounds pretty costly, are we just sending people there for a junket?”
Zuckerman suggested that NuHealth officials consider forming a domestic captive in a place such as Vermont, and attend meetings there.
Michael Mead, a longtime management consultant for captives, said NuHealth goes to the Caymans “because they get better regulators, more knowledgeable people who can give them what they need in their captive.”
Mead argued, “You should be choosing your domicile not based upon the travel and entertainment aspect but on what the regulations are, and how well the regulations are enforced, and managed. And that’s where Cayman stands above almost everywhere.”
But Kevin Dahill, president and CEO of the Nassau Suffolk Hospital Council, a Hauppauge trade organization representing 22 hospitals on Long Island, including NUMC, said, “I can see the point of the new chairman of NUMC saying at a time in which the overall hospital continues to be challenged, the optics are not good.”
Dahill noted, “A public safety net hospital has to be very sensitive to things like this.”
Maher said such offshore self-insurers are “very common in health care.”
Maher, who has attended some Caribbean Cayman trips, said compared with purchasing commercial policies, “there’s a savings there because any profit that the insurance companies would make would stay with the hospital.”
Another advantage is that “captives in the continental United States, at least when this captive was formed, had higher reserve requirements than what would be required in the Cayman Islands. So, because the reserves are not as significant, there’s an advantage to the hospital in that all of that money can be used to pay claims.”
Between 2012 and 2017, NHCC Ltd., a self-insurance company set up by the Nassau Health Care Corp., paid a total of $113,829 for meetings, registration fees, travel reimbursements and administration for board member trips to the Caribbean for business meetings.