Proposition 103 Invoked to Block $5,700 Per Doctor Hike By Medical Protective Co.
Santa Monica, CA — California’s ninth largest medical malpractice insurer, Medical Protective Company, should be prohibited from increasing its medical malpractice insurance rates by 29.2%, as the company has requested, according to the non-profit Foundation for Taxpayer and Consumer Rights (FTCR). The proposed hike, affecting California physicians and surgeons, would be Medical Protective’s third hike since 2002, and would raise premiums by $3.6 million. Using California’s Proposition 103, FTCR filed a formal challenge to Medical Protective’s proposed rate hike with the California Department of Insurance.
Medical Protective, an affiliate of General Electric, has increased its rates in California in each of the last two years by 12% or more.
“After increasing rates two years in a row, Medical Protective’s proposed hike is unreasonable, unjustified, and it should be rejected by the Insurance Commissioner,” said Lawrence Markey, a staff attorney with FTCR.
In California, insurance policyholders are protected by Proposition 103, a 1988 voter-approved ballot initiative that governs the California insurance industry. Under Proposition 103, insurers were required to immediately roll back rates. As a result, medical malpractice providers returned over $75 million directly to physicians after the initiative was enacted. The law also requires insurers to justify rate changes prior to imposing increases on policyholders, a process known as “prior approval” regulation. Under the law, consumers and advocacy groups such as FTCR can request a hearing on a rate hike proposal.
Based on FTCR’s initial review of Medical Protective’s rate request, the group identified several factors that it believes make the proposed hike excessive, including the following:
* Medical Protective’s requested rate of return is excessive;
* The proposed trends in losses and expenses are too high;
* The documentation of the proposed trends is inadequate.
FTCR recently mounted successful Proposition 103 challenges to rate increases proposed by the state’s two largest medical malpractice insurers. Overall, FTCR saved doctors insured by SCPIE Indemnity, approximately $27 million, and doctors insured by, Norcal Mutual, $11 million.
REGULATION, NOT LIABILITY CAPS, KEEPS RATES DOWN FOR DOCTORS
FTCR noted that in California, as around the country, medical malpractice insurers have been attempting to push rates dramatically higher in recent years despite California’s draconian liability caps. These caps, known as the Medical Injury Compensation Reform Act of 1975, or MICRA, are cited by the insurance industry as a model for addressing the national medical malpractice crisis.
But that is not what an actuary employed by a major medical malpractice insurer told the California Insurance Commissioner when trying to justify a rate increase, which the Commissioner ultimately found excessive. James Robertson, an actuary for SCPIE Indemnity testified in a rate hearing, “while MICRA was the legislature’s attempt at remedying the medical malpractice crisis in California in 1975, it did not substantially reduce the relative risk of medical malpractice insurance in California.”
That California, unlike so many other states, has been able to restrain physicians’ premiums, is due to Proposition 103, according to FTCR.
“Most doctors around the country do not have the protections afforded by Proposition 103‘s insurance regulation and, as a result, are facing uncontrollable rate hikes regardless of whether or not their state has malpractice caps. Regulation is a technical process that is far more fair and effective than the insurance industry’s proposal to impose arbitrary caps on damages. Regulation is the only way to rein in insurance rates,” said FTCR’s Executive Director, Douglas Heller.
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