Prop. 103 Saves California’s Midwives $5,000 Annually

Santa Monica, CA — American International Group, Inc., (AIG) has withdrawn a proposed 39.9% rate hike by its National Union subsidiary, after the non-profit Foundation for Taxpayer and Consumer Rights (FTCR) filed a challenge requesting a public hearing to determine whether the increase was warranted, the group announced today. The successful challenge will save each certified nurse midwife insured by National Union approximately $5,000. Consumer advocates hailed the withdrawal as further proof that California’s Proposition 103 — the voter-approved insurance reform law that governs insurance rates in California — and not California’s malpractice liability caps, hold down insurance premiums paid by medical professionals.

"This is another example in which Proposition 103 blocked an excessive rate hike where California’s malpractice liability caps did not." said Lawrence Markey, Jr., staff attorney with FTCR. "AIG sought a massive and unsupportable increase, and only withdrew it after a consumer challenge made possible by Proposition 103."

FTCR filed its formal challenge to the proposed rate hike with the California Department of Insurance in January, alleging that the rate request was based on unreasonable actuarial assumptions and estimates. Rather than defend its proposed increase in a public hearing as allowed by Proposition 103 the company chose to withdraw the rate hike, FTCR learned today.

Proposition 103 requires insurance companies to justify rate changes prior to imposing increases, and allows consumer groups like FTCR to challenge rate hike proposals and request public hearings. Proposition 103 also required insurers to roll back rates after its 1988 enactment, which returned over $75 million directly to physicians.

Since 2003, FTCR has successfully challenged rate increases in California proposed by four of the nation’s largest medical malpractice insurers. The challenges saved doctors insured by SCPIE Indemnity approximately $34 million, doctors insured by Norcal Mutual $16 million, doctors insured by the GE Medical Protective Company $4 million, and doctors insured by the Doctor’s Company $ 7 million.

A study released by FTCR revealed that California’s damage cap failed to reduce insurance rates for doctors. In fact, premiums increased 450% in the thirteen years after the passage of MICRA. Only when voters approved Proposition 103‘s insurance reforms did doctors’ premiums drop 20%, and then stabilize. Read the study.

– 30 –