Doctor insurer’s rates and perks up;

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Big bonuses alleged for top executives

Belleville News-Democrat (Illinois)

The past five years were tough on Illinois doctors, but good for top executives of the state’s leading provider of medical malpractice insurance, the former Illinois State Medical Society president contends.

According to Dr. Arvind Goyal, the nonprofit ISMIE Mutual Insurance Co. — an offshoot of the state medical society that insures 60 percent of Illinois physicians — has doled out to CEO Alexander Lerner and other ISMIE executives a variety of perks since the late 1990s.

Meanwhile, Goyal said, the insurer was raising premium costs by 120 percent in some cases, forcing hundreds of doctors to move away or retire.

Goyal testified in September before the director of the Illinois Division of Insurance in a hearing about whether the agency should approve ISMIE’s proposed rate increases for this year.

ISMIE chairman Dr. Harold Jensen declined to comment because rate hearings are still under way.

ISMIE perks to executives included:

Big pay raises, including one that boosted Lerner’s 2004 yearly salary to nearly $1 million, the firm’s annual reports show.

Low-interest mortgage loans, including a $995,000 loan on Lerner’s 4,800-square-foot home in Glencoe, a wealthy Chicago suburb, Cook County property records show.

Nearly $5 million in deferred compensation to Dr. Don Udstuen, a top lobbyist who pleaded guilty to taking part in a kickback scheme connected in testimony to former Gov. George Ryan.

“The years that the premiums went up significantly, they still managed to give an increase to the board members and to the senior executives,” Goyal said.

News media reports and ISMIE’s own records show that even as its leaders were asserting market conditions had forced them to raise premium rates, ISMIE was spending large sums on political campaigns, executive loans and big-ticket salaries.

“Those things just don’t make sense,” said Goyal, a family-practice physician based in suburban Chicago.

Illinois physicians are waiting to see how much impact Goyal’s complaints will have on their insurance bills — and by extension, their futures practicing medicine in this state.

Illinois Division of Insurance, which held a second set of hearings in November, could issue a decision as early as mid-January about whether to approve ISMIE’s proposed rate increases or roll them back, said Sue Hofer, an agency spokesman.

The decision will affect other Illinois insurers, Goyal said, “because when ISMIE raises rates, they do too.”

ISMIE’s Jensen stated it “would be inappropriate” for him to comment “on issues under consideration in the Division of Insurance’s ongoing rate hearing…”

Dr. Stephen Burger, president of the St. Clair County Medical Society, said he is unaware of any improprieties at ISMIE.

Burger, a neurologist, did criticize ISMIE’s leadership on one major point.

“I just don’t think they’ve done a very good PR (public relations) campaign to notify the general public — specifically the doctors — on how the operation actually works,” Burger said.

Goyal also has accused ISMIE of trying to justify its high premium rate increases with misleading statements about the number of malpractice claims filed with it.

Several years ago, the insurer expanded the definition of a “claim” to include instances in which policyholders are called to testify as witnesses in lawsuits, he said.

“They haven’t explained why this isn’t misleading,” he said.

Goyal’s charges foreshadowed conclusions reached in a report issued Friday by the Foundation for Taxpayer and Consumer Rights, of Santa Monica, Calif. The group describes itself as a non-profit consumer education and advocacy organization.

The report, titled “False Accounting,” accuses medical malpractice insurers nationwide of exaggerating the amounts paid out in claims as part of a campaign to justify high rate increases.

The “incurred losses” these insurers paid out were, on average, 46 percent higher “than the amount the insurers actually paid out on these policies,” according to the report’s authors.

The study’s authors called for a national moratorium on medical-malpractice rate increases and tort restricting laws. It should last until a definitive answer can be reached as to whether insurers are properly calculating and reporting losses, the authors asserted.

The Illinois insurance division received new powers of scrutiny as a result of a tort reform law that took effect in late August. The new law increases insurance regulation, enacts stricter discipline for bad doctors and caps “pain and suffering” awards at $1 million in cases against hospitals and $500,000 in cases against physicians.

Goyal would not deny the state’s medical industry has suffered a crisis brought on by other factors affecting insurance rates, including the public’s demands for a high standard of care that might not be realistic.

Still, ISMIE has not helped the situation, he said.

“We need to find a solution to every problem that’s been identified, including the problem of irresponsible insurance behavior,” he said.
Contact reporter Mike Fitzgerald at [email protected] or 239-2533.

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