Illinois’ first attempt at lowering malpractice insurance rates for thousands of doctors is drawing criticism from key players, but its chief architect promises it will provide much-needed relief.
Michael McRaith, director of the state’s Division of Insurance, said doctors will see “real, meaningful benefits” from the order he issued last week.
In an interview with The Associated Press, he said it will provide relief from insurance costs that doctors say are driving them out of business while not devastating the bottom line of ISMIE Mutual Insurance Co., the state’s major malpractice insurer.
“We had to find kind of the balanced, measured approach,” McRaith said Thursday. “It is a process we undertook very seriously to accomplish it professionally, without a predetermined result.”
Using a new state law approved last year, McRaith approved the rates that ISMIE, which covers nearly 70 percent of the state’s malpractice insurance market, proposed for the current year. Those rates were overall the same as the year before.
But he ordered the company to freeze its rates for next year and to try to cut them by 3.5 percent if that is financially possible.
He also required them to give discounts for doctors who take steps to avoid injuring patients and to provide rebates for excess premiums the company collects over a three-year period.
The state’s increased control over insurance rates is part of a law passed last year in response to complaints that malpractice lawsuits were driving up insurance costs and forcing doctors out of business.
The new law includes lawsuit limits such as caps on some lawsuit awards and restrictions on expert witnesses and lawsuit filings. Democrats and trial lawyers opposed those measures but, under political pressure, agreed to go along if the law also cracked down on insurance practices they blame for the higher costs.
Last week’s decision came after McRaith and his staff oversaw two lengthy public hearings last fall and pored over hundreds of pages of data.
A former lawyer who worked on behalf of insurers in finance-related lawsuits before being appointed by Gov. Rod Blagojevich to run the division a year ago, McRaith took a familiar approach to tackling the complex issue.
“As soon as I took this job, I looked at all of that stuff just like I was getting ready for a trial,” McRaith said.
McRaith put ISMIE’s top officials under intense questioning for hours, covering everything from their recent history of financial losses to how and why they charge doctors different rates depending on their specialty and location.
McRaith says the company was professional and provided all of the information he needed to make the decision.
But ISMIE officials aren’t overjoyed with the result.
ISMIE criticized McRaith’s 3.5 percent rate reduction target as arbitrary, saying it will still base its rates on losses it suffers to avoid jeopardizing the company’s “financial viability.”
Company officials also chastised the “unwise precedent” McRaith set in requiring ISMIE to open more of its ratemaking procedures to public and competitive scrutiny.
In a public statement ISMIE said that the order sets an unwise precedent by allowing state regulators to intrude in a company’s day-to-day operational policies, separate and distinct from premium rates.
While some of DOI’s operational directives affirm basic principles already in place at ISMIE, we dispute the notion that state regulators can, at will, step into an insurer’s operational decision-making, the March 14th ISMIE statement said.
Meanwhile, Republican lawmakers said the order shows ISMIE is charging the proper rates and the order doesn’t provide the long-term relief they expect to see from the new restrictions on lawsuits.
“These are things that we’d like to see happen naturally,” said Sen. Dave Luechtefeld, R-Okawville. “But this is a sound bite for the governor, that’s all.”
McRaith says his order will provide relief, independent of the lawsuit limits that likely will face a bitter and lengthy legal battle.
“It’s a way of giving doctors real, meaningful benefits, especially if the tort reform works as ISMIE has argued that it will,” McRaith said.
He said he understands that ISMIE is “extremely unhappy” but promises the Insurance Division will take its new role seriously. State regulators will review ISMIE’s new rates to see if there are discounts possible for doctors and make sure the company returns excess premiums to doctors.
McRaith won’t say whether any of the roughly 40 other malpractice companies in Illinois will go through similar hearings, with only about five actively writing new policies. He does say the governor’s office played no role in the outcome.
“The order that I signed is the order that I drafted,” McRaith said.
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