Establishes a physicians and surgeons data collection and advisory association

Summary of provisions

Section 1 of the bill would add a new Insurance Law § 2352 to establish an RSO for physicians and surgeons medical malpractice insurance.

Subsection (a) would provide definitions.

Subsection (b) would require to be a member of the RSO: (1) all insurers authorized to write personal injury liability insurance and engaged in writing, within New York, on a direct basis, insurance policies providing physicians and surgeons medical malpractice insurance; and (2) the Medical Malpractice Insurance Plan ("MMIP"), or its successor.

Subsection (c) would require the RSO to compile data related to physicians and surgeons medical malpractice insurance, and to provide to the Superintendent rates or rate information. The RSO would be exempt from: (1) licensing requirements under Insurance Law § 2313; (2) reporting requirements under Insurance Law § 2315; and (3) the prohibition against mandatory membership in an RSO under Insurance Law § 2316(a)(9).

Subsection (d) would require the governing body of the RSO to submit to the Superintendent a proposed plan of operation within 60 days following the effective date of Insurance Law § 2352.

Subsection (e) would require the governing body of the RSO to be comprised of voting members consisting of: 1) three members representing insurers; 2) one member representing the MMIP; and 3) three members appointed by the Superintendent and representing the interests of injured parties, physicians and surgeons, and hospitals. The governing body would have an actuarial

committee, which would review methodology and data collection processes used to develop rates and other information. The members representing the interests of injured parties, physicians and surgeons, and hospitals must together appoint one independent casualty actuary to serve on that actuarial committee.

Subsection (f) would require each member to submit a statistical report, as well as any other information that the Superintendent may deem necessary or expedient in order to establish rates for physicians and surgeons medical malpractice insurance.

Section 2 of the bill would add a new Insurance Law § 9112 to assess insurers writing liability insurance in New York.

Subsection (a) would provide definitions.

Subsection (b) would require the MMIP to submit to the Superintendent no later than August 31, 2010 a plan to operate a closed book consisting of policies issued between July 1, 2000 and June 30, 2010, as well as the MMIP's assets related to those policies.

Subsection (c) would mandate the Superintendent to determine annually whether the MMIP has sufficient monies to pay the MMIP's estimated claims and expenses for the subsequent twelve months. If the monies are insufficient, then the Superintendent is required to assess liability insurers prior to imposing a surcharge on policies.

Subsection (d) would require an insurer to pay the assessment provided for by subsection (c), which is not to exceed one-half percent of the insurer's net direct premiums received during the prior calendar year.

Subsection (e) would require an insurer to include a separately identifiable surcharge on premiums to offset the assessment.

Subsection (f) would exempt the assessment from certain taxation.

Subsection (g) would impose a penalty on an insurer that fails to pay the assessment.

Subsection (h) would require the Superintendent to deposit the assessment into the medical malpractice insurance fund established under the State Finance Law.

Section 3 of the bill would add a new section 89-h to the State Finance Law to establish the medical malpractice insurance fund for the purpose of paying claims and expenses arising out of policies issued by the MMIP between July 1, 2000 and June 30, 2010.

Section 4 of the bill would provide for an immediate effective date.

Existing law

In 1986, the Legislature enacted Chapter 266 of the Laws of 1986. This law requires the Superintendent of Insurance to establish medical malpractice insurance rates for insurers on an annual basis. The purpose of this legislation was to contain the spiraling cost of medical malpractice insurance. Under the current rate setting process, insurers file an "advisory rate" with the Superintendent on an annual basis. The advisory rate is based on loss experience, earned premiums, and other expenses. The Insurance Department actuaries analyze the advisory rate filing and make a recommendation to the Superintendent on the overall rate change for each insurer. In 2008 and again in 2009, the Legislature enacted a rate freeze on medical malpractice insurance for physicians. The rate freeze is scheduled to sunset on June 30, 2010.

Since 1975, the Medical Malpractice Insurance Association ("MMIA"), pursuant to Article 55 of the Insurance Law, provided medical malpractice insurance in New York. The MMIA was comprised of all authorized property/casualty insurers in New York. Following the dissolution of MMIA, Insurance Law § 5502(c)(2)(D) required the Superintendent to promulgate regulations prescribing a plan for the equitable distribution of MMIA insureds and health care practitioners and facilities that are otherwise unable to secure coverage in the voluntary market to authorized medical malpractice insurers writing such coverage in the state, or to designate a single entity to provide coverage consistent with an equitable plan of distribution. Unlike the risks of its predecessor MMIA, which were apportioned among all authorized property/casualty insurers, MMIP's risks are apportioned only among authorized medical malpractice insurers in New York. Unfortunately, MMIP has accumulated an undiscounted deficit of approximateIy $465 million-a sum that, by law, must be shouldered by the few companies selling,malpractice insurance in the state, exerting further pressure on insurance rates.

Legislative history

This is a new bill.

Statement in support

This bill establishes an RSO for physicians and surgeons medical malpractice insurance. Currently, the Superintendent establishes the full physicians and surgeons medical malpractice rate, which is comprised of the cost of the actual loss (the "loss cost"), as well as the expenses that an insurer has incurred, or will incur. The Superintendent establishes this full rate for each classification of physicians and surgeons, as well as for each insurer, which uses its own classification schedule. The RSO will operate similar to the New York Compensation Rating Board ("NYCIRB"), the RSO for workers' compensation insurance, in order to bring more transparency and uniformity to the rate setting process for physicians and surgeons medical malpractice insurance.

NYCIRB establishes only one loss cost for each classification across workers' compensation insurers. NYCIRB is able to do so because it has aggregated a rich collection of data in order to analyze the experience, and arrive at the pure cost of loss. Each insurer may file a deviation, which is subject to the Superintendent's approval, from the loss cost, in addition to its expense factor. This methodology ensures transparency in the rate setting methodology, and helps to promote competitive pricing that moderates the cost of insurance.

There is at present no central means to uniformly aggregate physicians and surgeons medical malpractice insurance loss data. Furthermore, the rating classifications differ among the various insurers in the market. The physicians and surgeons RSO would collect and compile data from insurers and, based upon its findings, provide information to assist the Superintendent in establishing the rate, As credible data aggregates Over a period of time, the RSO would be in a position to develop standardized rate classifications that could promote a more competitive market among insurers providing physicians and surgeons medical malpractice insurance.

The RSO would be governed by a board of directors representing all stakeholders in New York's medical malpractice insurance market-including insurers, injured parties, and health care providers - thereby ensuring that its decisions reflect the deliberations and interests of all parties affected by its actions.

Establishing the RSO is a first-but significant- step toward encouraging the development of a more stable and transparent medical malpractice insurance market.

In addition, if the MMIP does not have sufficient monies to pay it claims and expenses arising out of policies issued between July 1, 2000 and June 30, 2010, then the bill requires the Superintendent to assess insurers writing liability insurance in New York for the shortfall. Thus, the bill would eliminate the estimated $465 million deficit incurred by the MMIP.

Budget implications

This bill will have no fiscal impact on the State.

Effective date

This bill will take effect immediately.