Norcal Mutual Wants to Raise Doctors’ Premiums by $16 Million; Recent Ruling Stopped 2nd Largest Insurer From Overcharging Doctors
California’s largest medical malpractice provider, Norcal Mutual, should not be allowed to increase its physician policyholders’ insurance by 9.9%, according to the non-profit Foundation for Taxpayer and Consumer Rights (FTCR). The proposed hike would be the fourth since 2000; the companies’ rates are currently 26% higher than they were in 1999. FTCR, which filed a formal challenge to the firm’s rate hike proposal with the Department of Insurance on Monday, successfully challenged a recent rate increase proposal by the state’s second largest medical malpractice insurer SCPIE Indemnity, saving its doctors approximately $23 million.
“The current spate of rate hikes that insurers want to impose on doctors in California is unacceptable and the insurance commissioner must not allow Norcal or any insurer to overcharge its physicians,” said FTCR’s senior consumer advocate Douglas Heller. “Fortunately, because of California’s system of regulation, we can intervene and block these attempts to gouge policyholders.”
Based on FTCR’s initial review of Norcal‘s rate request, the group identified several factors that make the proposed hike excessive, including the following:
- Norcal‘s request for a 15% rate of return is excessive;
- The proposed trends in losses and expenses are too high;
- Norcal has added an extra factor for death, disability and retirement that is not allowed and would unnecessarily increases rates.
FTCR noted that in California, as around the country, medical malpractice insurers have been attempting to push rates dramatically higher in recent years. These increases are requested despite the state’s severe limitations on insurance payments to patients injured by malpractice. Still, insurers and medical associations around the country continue to lobby for California-style limitations on the rights of medical malpractice victims, often known as “malpractice caps.” The reason California, unlike so many other states, has been able to restrain physicians’ premiums, however, is Proposition 103, the state’s voter-approved insurance regulation law, 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 Heller.
Using Proposition 103, FTCR has challenged Norcal‘s proposed increase. The voter-approved proposition requires insurers to justify rate changes prior to imposing the changes 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 and, for commercial lines of insurance such as medical malpractice, if the increase is greater than 15%, the insurance commissioner must grant a hearing for the challenge. For increases lower than that threshold, such as Norcal‘s request, a hearing is held at the commissioner’s discretion. California Insurance Commissioner John Garamendi has until September 23rd to decide whether or not to grant FTCR’s request for a hearing.
On August 22, Commissioner Garamendi ruled that SCPIE Indemnity’s proposed 15.6% rate hike be reduced by more than a third after FTCR’s challenge of that firm’s 2003 proposal. Norcal‘s request asks the commissioner to allow the company to accept trends, profits and other actuarial determinations that are much higher than he accepted in the SCPIE ruling. Read more about the SCPIE ruling.