The ProSelect Insurance Co., the state’s second-largest medical malpractice
insurer, has been cleared for a 15.05-percent rate hike for doctors and a 38.66-percent
hike for hospital policies, effective last Thursday.
The proposed increase, approved Wednesday by the state Department of Business Regulation, follows a compromise reached last month by ProSelect and the attorney general’s office, which serves as a consumer advocate at insurance rate hearings.
The rate jump for ProSelect, which wrote about one-fifth of the malpractice policies in Rhode Island as of last year – not counting self-insured hospitals – would come as the market leader, NORCAL Mutual Insurance Co., is seeking a 19-percent hike.
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The third-largest malpractice insurer, the Medical Protective Co., has an 80-percent rate hike request pending, but it has said it doesn’t intend to renew current policies and isn’t taking new business.
ProSelect, which last year collected about $5.4 million in premiums, including $3.4 million from doctors, had sought an average 13.9-percent base rate hike for doctors and surgeons and 53 percent for hospitals, plus a change in its rating structure that would increase premiums by an extra 1.1 percent for corporations and partnerships.
The Boston-based insurer, which reported handling 34 new claims in 2003, based its request on an actuarial review of its historical losses and expected future expenses.
But Assistant Attorney General Genevieve M. Martin, who reviewed ProSelect’s filings with an economist and outside actuaries, argued that much smaller rate hikes would suffice – as little as 16.34 percent for hospitals. Martin objected to ProSelect’s whole method for calculating the needed premiums, and argued that the company was keeping “unreasonably excessive amounts” in surplus. Moreover, she argued, ProSelect’s filings didn’t reflect the substantial income it would generate from investing those reserves, nearly doubling its projected profit.
ProSelect is a subsidiary of ProMutual, a policyholder-owned company that doubles as Massachusetts’ malpractice insurer of last resort – a role played here by the Medical Malpractice Joint Underwriting Association of Rhode Island. Locally, it covers a cross-section of doctors and health-care service providers; its hospital roster includes South County Hospital.
ProSelect had filed its rate hike request in May, aiming to make its new rates effective Sept. 1, but the first public hearing on the proposal wasn’t held until Aug. 26. The hearing was continued on Sept. 24, and by then, ProSelect’s lawyers and Martin had reached an agreement.
The two parties agreed to disagree about each other’s calculations, but settled on a 15.05-percent overall hike for doctors (including the extra 1.1 percent for partnerships and corporations) and a 38.66-percent hike for hospitals, all effective Sept. 30.
In an interview, Martin said the compromise would save policyholders about $300,000 in premiums in the coming year. In addition, because the deal put an end to what can be a grueling, very costly rate hearing process, consumers will save when ProSelect comes back for a rate adjustment next year as well, Martin said.
“Those things can be quite expensive,” she said. “The cost of hearings gets wrapped up into next year’s premiums, so every dollar that we save goes back to the pockets of the ratepayers in terms of not having higher premiums.”
The deal came after a “hard-fought battle,” Martin added, but both sides felt it was “appropriate” to settle despite their strong disagreements because they had compromise figures they could live with. “At the end of the day,” she said, “it is beneficial to consumers to do this.”
The DBR’s hearing officers, Elizabeth Kelleher Dwyer and Paula M. Pallozzi, were not bound by the deal, but they accepted it as proposed. Representatives of the Rhode Island Hospital Association, the Rhode Island Medical Society, and the Rhode Island Trial Lawyers Association had all declined Dwyer’s invitation to comment on the rate proposals.
ProSelect lawyer Daniel S. Crocker had noted that 17 policies were up for renewal last week, and asked that Dwyer and Pallozzi “please hurry” so the new rates could be reflected in those customers’ bills. Dwyer promised to act “as fast as humanly possible.” Marilyn Shannon McConaghy, the director of business regulation, signed the decision Wednesday.
NORCAL’s hearing is scheduled for Oct. 19, with the proposed hike to be effective
Jan. 1.
