Firm News & Events

Insurer's Malpractice Premiums Challenged

90% Increase Comes Under Fire

By DIANE LEVICK
Courant Staff Writer

August 12 2004

Trial lawyers and consumer advocate groups are demanding that regulators investigate one company's "unconscionable" 90 percent rate increase for medical malpractice insurance in Connecticut.

The challenge is to Indiana-based GE Medical Protective's previously reported premium increases, which average 89.6 percent in Connecticut.

The increase, which will affect about 225 physicians here, took effect July 1 after being approved by the Connecticut Insurance Department in April.

The Connecticut Trial Lawyers Association, Connecticut Healthcare For All Coalition, the advocacy group Connecticut Patients' Rights and a Waterbury OB-GYN are calling on Insurance Commissioner Susan Cogswell to re-examine the rate filing and hold a public hearing on it.

The groups have also urged the commissioner to issue a cease and desist order to stop GE Medical Protective from continuing to charge the higher rates, until a new review is completed.

The trial lawyers association said it hired New Jersey-based AIS Risk Consultants to do its own actuarial review of the GE rates, which concluded that the insurer was making very high profits in Connecticut.

"Given the high level of profits earned by Med Pro, we believe it is unconscionable for Med Pro to request an almost doubling of its rates, which will result in even more outrageously high profits at the expense of Connecticut physicians and surgeons," the protesters said in a letter to Cogswell.

The impact on doctors, the letter added, "could in turn adversely impact the health care available to the citizens of Connecticut."

The challenge comes as an increasing number of OB-GYNs - who pay among the highest rates - are dropping obstetrics or limiting their practices in other ways, retiring early or moving to other states to pay lower premiums.

The new GE Medical rates would have cost Specialists in Women's Health Care in Waterbury more than $500,000 a year for its three OB-GYNs if the practice had stayed with GE Medical Protective. The company had been charging the practice $160,000 a year for all three.

The practice could not afford the increase and switched July 1 to Pro Mutual, which is charging about $336,000 for the three physicians, according to the office manager.

GE raised base rates 80.9 percent in Connecticut, but some specialties faced additional increases, bringing the overall average to 89.6 percent. The increase for OB-GYNs, according to the insurance department, averaged 93.7 percent.

Insurance department spokeswoman Kate Kiernan-Pagani said the department has sent the complaint from the trial lawyers and other groups to GE Medical Protective for a response later this month.

"We are taking it seriously," she said. "We're doing what we're supposed to do."

The department's own actuary reviewed the GE rate request, but actuaries often differ in their conclusions, Kiernan-Pagani said. Different methodologies and assumptions can lead to different results, for instance.

The department did not make the actuary or Commissioner Cogswell available for comment Wednesday.

GE Medical Protective spokesman John Novaria declined comment Wednesday, standing by his statement in March that "everything we're doing is actuarially justified."

The heart of the conflict is the claim history that GE used to figure its rate increases.

"They essentially just totally ignored their own experience," said Allan Schwartz, an actuary with AIS.

GE Medical said in March that it had too few policyholders here for claims data to be reliable, so the company based its rate filing on claims data of Connecticut Medical Insurance Co., a larger competitor in the state.

But GE's insuring 225 physicians here is "certainly enough to use some of their own experience" in figuring rates, Schwartz insisted. If GE had given some weight to its own claims data, it could have dramatically lowered the size of the increase, he said.

In California, for instance, GE Medical gave 40 percent weight to its own claims in a rate filing, Schwartz said. Over three years, GE wrote $18 million to $19 million of earned premium in California compared with about $14 million in Connecticut from 2000 to 2003, he said.

The company has been "showing a pattern of asking for inflated rate increases and trying to take advantage of the situation" in some states where there are few competitors, Schwartz said.

He figures GE Medical's operating profit in Connecticut was nearly 50 percent of its earned premiums here for the period 2000 to 2003, when 10 percent would have been "reasonable."

GE's Connecticut premiums were $13.9 million during the period, but the company incurred claims estimated at $4.6 million, Schwartz reports. The company had 36 claims here in the period, he said.

The company appeared to be losing money in other states, but it's not accepted practice to have Connecticut rates subsidize that problem, Schwartz said.

Trial lawyers say the GE Medical rates underscore the need for tighter regulation and prior approval of malpractice insurance rates before they are implemented.

The lawyers say they are frustrated that physicians have not demanded more accountability from their insurers.

Dr. Thomas J. McNamee Jr., a Waterbury OB-GYN who did sign the complaint letter, along with the lawyers, said he fears an unaffordable increase when his policy renews Jan. 1.

A solo practitioner, McNamee expects his premiums could approach $175,000 and said he may be forced to give up obstetrics or join a group practice. The increase GE has taken, he said, "just seems totally unreasonable because it was above and beyond" what other companies have done.

Copyright 2004, Hartford Courant

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