Insurer’s 90% Med-Mal Hike Under Fire in Conn.

August 16, 2004

A coalition of trial lawyers and consumer groups is challenging a medical malpractice insurer’s plan to increase premiums in Connecticut an average 89.6 percent.

The rate hike for GE Medical Protective Insurance Company (Med Pro) started being passed along to physicians July 1, after it was cleared by the Connecticut Insurance Department.

However the Connecticut Trial Lawyers Association, joined by two consumer groups and an individual doctor, have asked Insurance Commissioner Susan Cogswell to halt the increase and hold a public hearing to review what they say is an “excessive” and “unconscionable” price increase.

Cogswell has in turn asked Indiana-based Med Pro to respond to the challenge by Aug. 28. She has the option of ordering a public hearing.

Med Pro spokesman John Novaria said his company is preparing its response but declined to comment in the meantime.

The groups hired their own actuary to review MedPro’s filing. They maintain that the insurer did not use any of its own Connecticut or nationwide experience in establishing its latest rates, but instead referenced the rates being used by a competitor, Connecticut Medical Insurance Co., the state’s largest writer.

MedPro’s filing indicated that its own claims experience in Connecticut was too small to be reliable in rate-setting.

“I’ve seen them do this elsewhere,” said actuary Allan Schwartz, of AIS Risk Consultants, Inc., in Freehold, N.J., who reviewed the filing on behalf of the critics. “If the state experience is favorable, they ignore it. It appears there is a bias going on here.”

Schwartz said it is “standard actuarial procedure” for a company to first look at its own data. Market share size then can be used in deciding how much weight to give that local data, he added.

He said he has also reviewed MedPro filings in other states, including California and New Jersey, and witnessed a similar strategy of the company using whatever data supports the biggest increase.

Schwartz said his analysis shows that MedPro was making a “very high” profit of almost 50 percent in Connecticut — even before it sought to hike its rates by close to 90 percent.

“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, which could in turn adversely impact the health care available to the citizens of Connecticut,” the trial lawyers and consumer groups wrote to Cogwell.

Joining the trial lawyers were the Connecticut Patients’ Rights Group, the Healthcare for All Coalition and a Waterbury physician, Dr. Thomas J. McNamee, Jr.

They have asked Cogswell to issue a cease and desist order to stop the insurer from charging the higher rates and convene a public hearing to review the filing.

Kate Kierban-Pagani, spokesperson for Commissioner Cogswell, said the department actuary had reviewed the MedPro filing before approving it in April but that Cogswell was taking the latest challenge seriously.

MedPro reportedly writes about 225 physicians in the state. In 2003, it wrote about $11 million in written premium while CMIC wrote about $45 million, according to Schwartz.

Schwartz estimates that MedPro’s paid losses from 2000 to 2003 were only about one percent of written premium and that incurred losses were about 33 percent of earned premium. The result was an operating profit of $6.8 million, or almost 50 percent of earned premium.

Formed in 1899, Medical Protective claims to be the oldest professional liability carrier in the U.S. and a pioneer in professional liability protection for doctors. It now writes more than 80,000 doctors and dentists nationwide with an emphasis on insuring “select” professionals.

MedPro enjoys high financial ratings. Standard & Poor’s has awarded it an A+ (Strong), while A.M. Best assigned it an A- (Excellent) rating.

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Latest Comments

  • August 20, 2004 at 6:16 am
    Chuck says:
    I would have more sympathy for Medical Protective if not for our recent experience in Texas. In September, 2003, at the urging of the insurance and medical communities, Propos... read more
  • August 16, 2004 at 1:02 am
    Mike says:
    Sorry Winston - not fraud. It's these kinds of comments that make me despair of anyone truly understanding insurance. Even if these guys are writing claims-made policies, they... read more
  • August 16, 2004 at 11:22 am
    R says:
    This is no different than price gouging by contractors after a storm. Pricing not based on actual results but a distorted market condition. At GE greed is still good.
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