N.Y. Executive Budget Proposal Would Cut Judgment Interest Rate, Alter How State’s Excess Insurance Program Is Funded
New York Gov. Kathy Hochul unveiled her 2022-2023 Executive Budget in late 2021, which includes a more than $10 billion, multi-year investment in the state’s healthcare system. It also contains two proposals that would affect the medical liability community.
The governor’s budget proposal would fund healthcare initiatives aimed at modernizing the state’s emergency medical services, establishing telehealth reimbursement parity, strengthening home care, improving retention of the existing medical workforce, expanding access to training and education, and recruiting care workers to underserved areas. Gov. Hochul believes these investments could expand New York’s healthcare workforce by 20% in the next five years.
Of specific interest to the medical malpractice insurance industry, the budget recommendation calls for legislation changing the pre- and post-judgment interest rate for liability awards from a fixed 9% statutory rate to a variable market-based one. With the notoriously lengthy process of adjudicating a medical liability claim, this change could equate to considerable savings in claims costs.
“The governor’s proposal to significantly reduce interest rates on court judgments would help to bring down New York’s exorbitant medical liability insurance costs,” said Joseph R. Sellers, MD, FAAP, FACP, Medical Society of the State of New York president. “However, given the enormous challenges we have faced over the last two years, physicians are very concerned with another proposal that would thrust potentially significant new costs on countless physicians in the state who are enrolled in a long-standing program to provide supplemental insurance coverage to help offset New York’s notoriously high medical liability costs.”
Sellers is referring to the budget proposal’s call to modify the funding structure of the state’s Excess Medical Malpractice Insurance Program. Under Section 18 of the New York Medical Malpractice Reform Act, physicians who maintain primary insurance coverage limits of $1.3 million per claim and $3.9 million in annual aggregate with a New York State-admitted medical liability insurance company are eligible — at no cost — for an additional $1 million per claim and $3 million in annual aggregate coverage from the state’s excess medical liability insurance program. Access to the free program has been a competitive advantage that medical professional liability insurance companies operating in the state’s standard admitted market have had over risk retention groups and other alternative risk transfer products.
Gov. Hochul’s budget provides $102 million for the Excess Medical Malpractice Insurance Program, the same amount as last year. However, it restructures the program so that eligible physicians would be required to purchase excess coverage directly from a provider of excess liability insurance coverage. From funds available in the excess liability pool, the Department of Financial Services would reimburse 50% of the premium at the conclusion of the policy period, and the remaining 50% of the premium would be paid one year after.
“GNYHA strongly opposes this proposal,” said the Greater New York Hospital Association in a message to members. “There is a significant risk that physicians will forgo buying excess insurance if they have to pay out of pocket for it and wait two years for full reimbursement. This would also add costs to hospitals, either for paying the contribution on behalf of employed physicians, if the hospital can afford it, or in the form of expanded exposure, if physician codefendants forgo excess coverage, because they cannot afford it. This proposal would more significantly impact safety net hospitals and lower-income physicians.”