Joint Committee on the Health Care Stabilization Fund

1. Joint Committee on the Health Care Stabilization Fund July 6, 2005 Missouri Department of Insurance

2. Kansas Health Care Stabilization Fund:History • History • Mid-1970s Kansas faced a medical malpractice insurance “crisis” • 1976 - SB 646 Health Care Provider Insurance Availability Act was signed into law • Established mandatory malpractice coverage limits • Created the Health Care Stabilization Fund to provide excess professional liability coverage above the basic coverage level provided by private insurers and to provide “tail” coverage to qualified inactive health care providers • Created the Health Care Provider Insurance Availability Plan to provide basic coverage for health care providers who cannot obtain coverage from the private market (Similar to Missouri’s Medical Malpractice Joint Underwriting Association – JUA)

3. Kansas Health Care Stabilization Fund:Mandatory Malpractice Coverage • All Kansas health care providers are required to maintain medical malpractice insurance as a condition of licensure • Minimum required coverage limits are $200,000 per claim / $600,000 annual aggregate • Providers who cannot obtain coverage in the voluntary market may obtain coverage from the Health Care Provider Insurance Availability Plan

4. Kansas Health Care Stabilization Fund • A “health care provider” is defined by K.S.A. 40-3401 (f) as: • M.D.s • D.O.s • D.C.s • D.P.Ms • C.R.N.A.s • Hospitals • Ambulatory surgical centers

5. Kansas Health Care Stabilization Fund:Fund Coverage • The Fund provides excess coverage ONLY • Provider may select one of 3 excess coverage options: • $100,000 per claim/ $300,000 annual aggregate • $300,000 per claim / $900,000 annual aggregate • $800,000 per claim / $2,400,000 annual aggregate* *Most Popular

6. Claim Analysis - 1 Million Claim

7. $1m PER CLAIM/$3m Aggregate • Cost of $ 1m/$3m Insurer Policy > Cost of $ 1m/$3m from Fund + Insurer

8. Kansas Coverage Costs for $800,000 - $2,400,000 Stabilization Fund Coverage

9. Claim Analysis - 1 Million Claim • Physician 1 • Claim: $1 million • Coverage purchase is $1 million/$3 million

10. Claim Analysis – 2 Million Claim

11. Claim Analysis - 2 Million Claim • Physician 2 • Claim: $2 million • Coverage purchase is $1 million/$3 million

12. Insolvency

13. Kansas Health Care Stabilization Fund:Additional Protections • The Fund provides coverage for prior acts, or “tail” coverage, for all claims brought against qualified inactive health care providers • The Fund administers the basic-coverage self-insurance programs for persons engaged in qualified residency training programs and the University of Kansas Foundations and their full-time physician faculty

14. Kansas Health Care Stabilization Fund:Organization • Agency of the State of Kansas • Administered by a 10-member Board of Governors • 3 medical doctors • 2 osteopaths • A registered nurse anesthetist and • A chiropractor • Members are appointed by the Insurance Commissioner to staggered 4-year terms

15. Kansas Health Care Stabilization FundFunding • Fund receives no general revenue • Completely funded by a “surcharge” levied on all active health care providers • Surcharge amount is set by the Board through a rate classification system • The amount paid is a calculation based upon: • Specialty • Years of compliance • Selected level of Fund coverage

16. Kansas Coverage Costs for $800,000 - $2,400,000 Stabilization Fund Coverage

17. Kansas Medical Malpractice Liability: Industry Requirements • Insurers who provide coverage to Kansas health care providers must provide prior acts coverage for all periods of Fund compliance • Eliminates the need for providers to purchase reporting endorsement coverage (“tail coverage”) when changing primary insurance carriers • All basic insurers must provide overall or total coverage for all professional services rendered by a Kansas health care provider

18. Potential Stabilization Fund Benefits • Lower Coverage Costs • Lower Industry /Provider Exposure • Enhanced Likelihood of Injury Compensation

19. Potential Stabilization Fund Concerns • Additional bureaucratic layer • Slower claims processing • Solvency issues • Additional competition in the market

20. Current Medical Malpractice Carriers in Missouri • Private Market: (Approximately 8- Physicians & Surgeons) • Chapter 383 Companies: (4) • Missouri Doctors Mutual Insurance Company • Missouri Physician Mutual • Physicians Professional Indemnity Association • Missouri Hospital Plan (Insures hospitals and physician employees) • Medical Malpractice Joint Underwriting Association (1)

21. 383 vs. JUA vs. Stabilization Fund

22. Physicians Insured by 383s • Missouri Doctors Mutual Insurance Company • 74 physicians • Missouri Physician Mutual • 2,112 physicians • Physicians Professional Indemnity Association • 467 physicians

23. Physicians Insured By JUA • Physician portion is: • 2 Neurosurgeons • 2 Ophthalmologists (with major surgery) • 3 Internal medicine with no surgery • 1 Cardiovascular disease with minor surgery • Insures 44 long-term care policies and 110 long-term care facilities

24. Market Comparison (2004) • Estimated Current Physicians within Missouri: 14,346 • Total 383 Physicians: 2,653 • Total JUA Physicians: 8 Estimated Physicians In Voluntary Market: 11,685

25. 383 Direct Premium Written and Earned (2004) • Missouri Doctors Mutual Insurance Company • Written: $1,372,534; earned: $804,660 • Missouri Physician Mutual • Written, $37,717,350; earned $33,773,458 • Physicians Professional Indemnity Association • Written: $8,102,880; earned, $4,598,253 • Missouri Hospital Plan (Insurers hospitals only) • Written: $34,169,082; earned, $18,319,582 • An estimated average annual premium charged to a physician by a 383 during 2004 is $17,788.

26. Missouri Physicians By County/Specialty

27. Missouri v. Kansas Stabilization Fund

28. 10 Funds Created Nationwide • Florida Patient’s Compensation Fund▲ • Fund closed as of 1983 • IndianaPatient’s Compensation Fund* • Kansas Healthcare Stabilization Fund • Louisiana Patient’s Compensation Fund* • Nebraska Excess Liability Fund* • New Mexico Patients’ Compensation Fund* • Pennsylvania Medical Care Availability and Reduction of Error Fund • Fund scheduled to be gradually phased out by 2009 • South CarolinaMedical Malpractice Patients’ Compensation Fund • WisconsinPatient’s Compensation Fund* • Wyoming Medical Liability Compensation Account • Enacted but not established ▲ List does not include two states, Florida and Virginia, which have implemented special funds for the payment of medical claims involving birth-related defects only. * Fund under the jurisdiction/oversight of the Department of Insurance

29. Thank you! Disclaimer: Information provided in presentation is based on 2004 data and gathered by the Department from various resources. Although all attempts have been made to verify the accuracy of the information provided, the Department does not vouch for the accuracy of external information provided. The information provided is subject to change and/or revision and is intended for informational purposes only. For further information, please feel free to contact Maria Cauwenbergh, Legislative Coordinator, Missouri Department of Insurance at Maria.Cauwenbergh@insurance.mo.gov.