A rate hike request by ProSelect Insurance Co., the state’s second-largest medical malpractice insurer, has met with strong resistance from the attorney general’s office and the Rhode Island Trial Lawyers Association, both of whom say rates should go down, not up.
ProSelect, which as of May 26 covered 466 doctors and one nurse-midwife, had applied for a 7-percent rate hike for them and a 16-percent hike for hospitals and medical facilities, effective Sept. 30.
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At a R.I. Department of Business Regulation hearing last week, however, ProSelect amended its request to 4.9 percent and 13.5 percent, saying it had found a mistake in its calculations.
But Assistant Attorney General Genevieve M. Martin, who acts as the consumer advocate in insurance matters, proposed a more dramatic change: rather than raise rates, she argued, ProSelect should cut doctors’ rates by 14 percent, and hospitals’ by 14.8 percent.
Jay Angoff, a nationally known insurance industry critic brought in by the trial lawyers, also argued for a rate cut, though for somewhat different reasons.
The DBR is expected to take some time to make its decision, but initial indications – based just on the questions being asked by the hearing officers and their actuary – suggest that at least some of the criticisms of ProSelect could be taken seriously.
Historically, contested requests have tended to result in compromises, with carriers getting smaller hikes than they’d sought.
Yet the very fact that this request went to a full hearing shows a change in the climate: The last two hikes approved in Rhode Island – 19 percent for NORCAL Mutual Insurance Co., the state’s largest malpractice carrier, and 15.05 and 38.66 percent for ProSelect’s doctor and hospital lines, respectively, had been backed by stipulations from Martin. (In ProSelect’s case, she did negotiate a smaller hike before signing off.)
The trial lawyers didn’t intervene in either of those cases, but after a behind-the-scenes battle with the Rhode Island Medical Society, hospitals, insurance companies and their allies this legislative season that succeeded in quashing proposed tort reforms – but also killed reforms the lawyers wanted – they’ve revived their efforts at the DBR.
Another fight is expected this month, when the Medical Malpractice Joint Underwriting Association of Rhode Island, the state’s insurer of last resort, goes for a 99.8-percent hike, effective Oct. 1, for the four hospitals and 92 nursing homes it covers.
The MMJUA already went head to head with Martin recently to change its hospital experience rating plan in a way that dramatically raised rates (after a full hearing, the DBR issued a compromise ruling), and that actually is expected to make the impact of this proposed hike on hospitals much smaller, only 9.3 to 13.25 percent, by the MMJUA’s estimates.
Nursing homes, however, aren’t experience-rated and could see their rates double.
Meanwhile, NORCAL has also requested a rate hike, 10 percent, to be effective Jan. 1, but no hearing has been scheduled yet.
To get their increases, all three carriers must prove their requests are actuarially justified and not unreasonable, excessive or unfairly discriminatory. The companies aren’t compared to one another, and the fact that one has been cleared to charge, say, $10,000 a year for family practitioners doesn’t necessarily mean the others will get to do it.
Still, in pre-filed testimony, Stephen J. Langlois, director of underwriting and actuarial services for ProSelect’s parent, ProMutual, pointed out that his company’s current base rates are 72.5 percent of NORCAL’s for the same type of coverage.
NORCAL nevertheless has a much larger market share than ProSelect, 47.7 percent vs. 19.6 percent of 2004 direct premiums written. Robert Anderson, head of the Rhode Island Medical Society Insurance Brokerage, said NORCAL is known for its aggressive defense efforts, and doctors are willing to pay more for that. But NORCAL also offers steep discounts for some doctors, Anderson added, so the price difference isn’t so clear-cut.
In terms of losses, ProSelect isn’t claiming that they’ve gotten worse – just that the costs keep adding up. In a report filed with the DBR, ProSelect said it had paid $315,000 in indemnity last year, plus $35,555 in related costs, but it also got 26 new claims, including 19 lawsuits.
Still, given the relatively small hikes ProSelect had sought, some were surprised to see the aggressive response it elicited; what had been expected to take an afternoon became a four-day hearing.
Advocates on both sides of the tort-reform fight also made their views known to the DBR hearing officers.
Ann Rhodes, of Rhode Island for Health Care, urged them to “remember the broader picture” of medical liability in the state, because the cost of malpractice insurance “does matter, and not just for those who sell it.” She also said “whatever the causes” of rate hikes, higher jury awards “are not among them.”
Dr. Fredric V. Christian, president of the Medical Society, submitted a written statement in which he argued that the repeated rate hikes “are simply unsustainable” and “are destroying the infrastructure that Rhode Islanders depend upon for their health care.”
In this context, Christian said, the insurance companies’ conduct “must be subject to rigorous scrutiny,” but the process itself is also “extraordinarily resource-intensive” and adds to the policyholders’ costs. Noting that Medical Protective, another large malpractice carrier, left Rhode Island last year, he warned: “We absolutely cannot afford to discourage strong, high-quality insurers from doing business here.”
