Doctors’ dividend to get state scrutiny

Malpractice insurer was to award $68 million to members
by Douglas Tallman | Staff Writer

Maryland’s new insurance regulator has called a hearing for next month to decide how much the state should collect of a proposed $68.6 million dividend from the state’s leading medical malpractice insurer.

Insurance Commissioner Ralph S. Tyler, citing a law passed during the 2004 special session, ordered the hearing on Thursday. In declaring the dividend, the Medical Mutual Liability Insurance Society of Maryland has offered to reimburse the state nearly $21.5 million. The hearing is scheduled for Oct. 5.

‘‘I need a greater opportunity to review and digest this proposal,� Tyler said in a statement. ‘‘With this amount of money at stake, I want to be sure that it is handled appropriately.�

John Franklin, Med Mutual’s assistant vice president for communications, said Tyler’s order prevented any comment from the company. Karen Barrow, a spokeswoman for the Maryland Insurance Administration, said Tyler’s action was not meant to be a gag order.

During the 2004 special session, the General Assembly imposed a 2 percent tax on payments to health maintenance organizations, or HMOs, that would be used to prevent large increases in malpractice insurance premiums.

Then-Gov. Robert L. Ehrlich Jr. (R) spent weeks drumming up support for the session, proclaiming a crisis in huge increases in premiums was driving doctors out of state.

The legislature passed the law, Ehrlich vetoed it, opposing the HMO tax. The Democrat-controlled legislature overturned the veto at the beginning of the 2005 General Assembly.

Under the law, the state’s insurance commissioner would administer the fund.

In a letter to Tyler, Med Mutual’s lawyer David M. Funk said the society would not need the subsidy for 2008.

Martin Wasserman, executive director of MedChi, the state’s medical society, said the dividend came from fewer malpractice claims than had been predicted. He said the dividend should be returned to doctors.

‘‘They weren’t meant to give the state a windfall,� Wasserman said.

Med Mutual is the largest medical malpractice insurer in the state, with nearly 7,000 members, according to documents the company gave to the insurance administration.

The insurer collected $119 million in premiums for 2005 and $135 million in 2006, according to the documents. During those years, Med Mutual received $27 million and $33 million, respectively, in subsidies from the state.

So far in 2007, Med Mutual has received $11 million in subsidies.

Gov. Martin O’Malley (D) appointed Tyler, who had been the governor’s chief legal counsel, as insurance commissioner on Sept. 6. When O’Malley was the mayor of Baltimore, Tyler was the city solicitor, where he played an important role in O’Malley’s successful court challenge of a deal on electricity rates, an important issue in last year’s gubernatorial campaign.
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