Malpractice Insurer To Cut Premiums 8%: Medical Mutual Liability Insurance Society Will Return $84 Million To State
The state’s insurance commissioner and its largest malpractice insurer today announced that the insurer will cut premiums by 8 percent for next year and return $84 million to the state.
In addition to the rate cut, Medical Mutual Liability Insurance Society of Maryland will distribute $13.8 million in dividends to doctors against 2008 premiums. That will mean most Maryland doctors will pay the same amount for liability coverage in 2008 as they did in 2007.
With a state subsidy for premiums ending, the combination of the rate cut and the dividend was needed to keep the cost the same for physicians. Without them both, doctors would have paid 22 percent more, the amount of the lost subsidy.
The $84 million represents the amount that Med Mutual has received in the past three years and would have received next year in premium subsidies.
Gov. Martin O’Malley praised the deal as showing the benefits of a regulatory agency that is “proactive and calling the balls and strikes.”
Med Mutual had initially planned to pay a larger dividend to doctors and a smaller payback to the state, but that was blocked by Insurance Commissioner Ralph S. Tyler.
Tyler and Med Mutual had been deadlocked for months, although both sides said they wanted to keep doctors’ costs of coverage level. But until recently they disagreed — on both legal and practical grounds — on how to accomplish that.
After two public hearings, Tyler blocked Med Mutual’s original dividend Nov. 20, but delayed his order for 30 days, giving Med Mutual a chance to submit a plan that would meet regulatory approval.
“And, indeed, a better solution has been found,” Tyler said at today’s State House press conference.
The disagreement was solved when, in private talks over the last few weeks, Med Mutual proposed to increase its total dividend to $97.9 million, enough to repay the state fully for the subsidy and to give doctors enough of a dividend to keep their liability payments the same as this year’s.
Jeffrey M. Poole, Med Mutual’s executive vice president and chief operating officer, said as the dispute proceeded, Med Mutual had several months more data showing flat claims payouts, giving the insurer comfort in declaring a larger dividend and cutting premiums.
Med Mutual insures about 6,400 doctors, an estimated 70 percent of those in private practice in the state. Other malpractice insurers generally use Med Mutual’s claims experience in setting their own rates, and Tyler said yesterday he would be reviewing the rates of the others.