LOS ANGELES (BestWire) – The second-largest provider of medical-liability insurance in California has had its 2003 rate request–originally approved by the insurance department–set aside as a consumer group requests public hearings into the need for the increase.
SCPIE Indemnity Co. and American Healthcare Indemnity Co.–subsidiaries of SCPIE Holdings Inc. (NYSE:SKP), said their increase of about 15% in California medical-malpractice insurance rates–set for implementation on Jan. 1–has been put on hold under a provision of Proposition 103 that requires the insurance department to hold public hearings if requested by the public for any commercial insurance rate increase above 15%, SCPIE spokesman Howard Bender said.
“We believe our rate increase was actuarially correct and was needed, and it was originally approved by the department, although that approval has been put on hold until after the hearing,” Bender said.
While the original request for the 15% increase still stands, SCPIE withdrew a second, lower request was when it was advised of the hearing, Bender said. Prop 103–passed in 1988–was designed to provide additional transparency to the insurance industry, permitting information to be made available on request outside the normal process of the insurance department, according to the Foundation for Taxpayer & Consumer Rights, the consumer group that called for the hearing.
“If other states had the kind of stringent rate regulation required by Prop 103, there would be no medical malpractice ‘crisis’ in America today,” Harvey Rosenfield, president of the foundation and author of the proposition, said in a statement.
California’s Medical Injury Compensation Reform Act–or MICRA–is held up as a model other states should follow in addressing the problems of medical-liability insurance. Passed in 1975, MICRA limits liability claims filings and settlements for malpractice cases, providing a more predictable range for insurers to use in predicting claims levels. MICRA requires evidence of collateral-source payments–such as personal health insurance–to limit economic costs. It also requires binding arbitration of disputes (BestWire, Oct. 28, 2002).
At this point, SCPIE is billing its renewal policies for 2003 at the same rates as in 2002, Bender said. If the new rates are approved, they will be prospective, with no going back for any charges prior to the approval, he said. The SCPIE companies estimate monthly written premiums will be about $1.5 million less than would be realized if the requested rates had been fully implemented, the company said.
“This delay will cost the company a lot of money, not only in premiums not received but in preparing and presenting the information for the hearing,” Bender said.
The foundation says the rate increase is unjustified and more a matter of insurance companies attempting to offset stock-market losses, rather than an actual increase in claims costs. The challenge to the SCPIE rate increase will save the 9,100 California policyholders of SCPIE about $2,000 each a year, the foundation said.
No date has been set for the hearing, Bender said.
The SCPIE Cos. are rated B+ (Very Good) by A.M. Best Co. SCPIE Holdings’ stock was trading at $7.26 a share on the afternoon of Dec. 11, up 4.16% from the previous close. The top five providers of medical-liability coverage in California in 2001, according to A.M. Best Co. state/line product information, were; Norcal Group, with a 23.5% market share; SCPIE Cos., with 18.4%; Doctors Company Insurance Group, with 13.5%; Zurich/Farmers Group, with 7.1%; and MIEC Group, with 4.1%.
According to the California Medical Association, for 2002, MICRA‘s average savings across all specialties has been more than $42,000 for each physician in the state. In neurosurgery, among the highest-cost specialties, a Los Angeles physician will pay on average about $68,000 for the year, compared with about $279,000 a year for a neurosurgeon in Dade County, Fla. An obstetrician, another high-end specialty, will pay about $61,000 in California, compared with more than $200,000 a year in Florida (BestWire, Oct. 28, 2002).
contact the author at: [email protected]