Flashback: New York Malpractice Insurance Gets First Rate Increase After Two-Year Moratorium
side note: This article first appeared in the August 2010 issue of Medical Liability Monitor, the industry’s premier source for consistent, reliable coverage and fresh perspectives on medical professional liability insurance and risk management issues. To subscribe to the Monitor, please click here.
On July 6, 2010, Insurance Superintendent James J. Wrynn announced the approval of a five-percent average New York malpractice insurance rate increase for the state’s doctors. By New York law, Wrynn is charged with establishing the rates for medical malpractice insurance coverage. The increase, which took effect retroactively to July 1, followed a two-year moratorium on malpractice rate increases.
“I am pleased that we could keep the first medical malpractice rate increase in three years to an average of five percent,” Wrynn said. “This rate will help hold the line on costs for physicians while giving the insurance companies the resources to pay claims as they come due.”
Wrynn established new base rates resulting in five percent increases for Medical Liability Mutual Insurance Company (MLMIC), the largest medical malpractice insurer with almost 60 percent of the market, and Physicians’ Reciprocal Insurers (PRI), the second largest medical malpractice carrier with almost 30 percent of the market. Two smaller specialty carriers, Hospitals Insurance Company (HIC) and Academic Health Professionals Insurance Association (Academic), also received five-percent increases. While the average rate will increase by five percent, some doctors’ increases can be somewhat more or less depending on their specialty and location.
The Medical Malpractice Insurance Pool (MMIP) is the state’s insurer of last resort. MMIP provides insurance for doctors and others who are not able to get insurance in the voluntary market. For the fewer than 300 doctors covered by the pool, rates will rise an average of 9.9 percent. The Department of Insurance does not set rates for risk retention groups and captives.
“In the short term, this increase will relieve the pressures on both doctors and insurers,” Wrynn said. “But long term, the system is still in crisis and needs to be reformed. We cannot afford to lose doctors because of high medical malpractice insurance rates and we have to make sure patients are properly protected. We will keep working toward a longterm solution.”
Industry insiders have noted for years that New York has had a dwindling number of medical liability insurers because there exists the perception that the state does not allow them to charge sufficient rates. In addition, the MMIP, which is funded chiefly by the insurers licensed in the state, is running a deficit of almost $500 million.
“Ever since 2001, the severity of claims costs for all New York physicians has been increasing significantly; however, the rate increases set by the Superinten-dent of Insurance have not kept pace,” wrote Robert A. Menotti, MD, MLMIC president, in a letter to policyholders after last year’s continued rate freeze. “MLMIC has had to absorb this difference by a reduction in our surplus funds. Our company’s surplus is comprised of funds (held in excess of the reserves set aside to pay claims) which are maintained for unforeseen events, such as catastrophic losses.”
Earlier this year, Wrynn proposed the creation of an independent rate service organization to attract medical malpractice insurers to the New York market and all property/casualty insurers agreed to an assessment plan to reduce the $480 million deficit in New York’s Medical Malpractice Insurance Plan.