The Texas Department of Insurance announced that doctors coming to the state’s Joint Underwriting Association (JUA) for medical malpractice insurance now have more policy choices and, for certain beleaguered specialties, lower premium rates because of a unanimous decision by the JUA’s board of directors.
“The JUA is now a more realistic option for doctors struggling to find viable coverage in today’s difficult medical malpractice insurance market,” said Commissioner Jose Montemayor. “The JUA board has responded promptly and effectively to the coverage needs expressed by physicians. I believe its action will help assure Texans’ access to quality medical care by enabling some doctors to continue in practice who otherwise might have left because of the malpractice insurance crisis.”
The Commissioner noted, however, that more attractive JUA policies and lower rates for certain specialties can be viewed only as a stopgap measure for addressing the present crisis of skyrocketing medical malpractice insurance rates and a shrinking number of carriers.
Governor Rick Perry recently recommended comprehensive legislation to provide a long-term solution to the medical liability insurance crisis. The Governor’s proposals include a $250,000 cap on non-economic losses, limits on attorneys’ contingency fees, improved efforts to reduce medical errors and the creation of special courts to try medical malpractice lawsuits.
The Legislature created the non-profit JUA in 1975 to provide a source of malpractice insurance for physicians and providers having difficulty finding this coverage in the normal commercial market. Physicians and health care providers are eligible for coverage by the JUA if they are denied coverage by two licensed insurers or would be accepted only at premium rates higher than the JUA’s.
The JUA is governed by a board that includes health care and insurance professionals and public members. The JUA is regulated by the Texas Department of Insurance, which assisted the JUA in developing the new policy options and new rates. TDI approved the new policy language and reviewed the JUA’s new rates for reasonableness and adequacy.
The JUA board action to improve coverage and rates came at a critical time. Many doctors’ malpractice policies have July renewal dates. However, rapidly rising claim costs have caused private carriers to increase rates or leave the market. About 6,000 physicians are affected by the departure of eight carriers from the market. Active carriers have raised rates significantly, led by increases totaling 119.6 percent since 1999 by The Texas Medical Liability Trust, which covers about one-third of the state’s doctors.
One effect of the malpractice insurance crisis has been a flood of new applicants to the JUA. The JUA now has more than 700 policyholders, including about 650 physicians. A year ago, it had only 168 policyholders, including about 150 physicians.
Montemayor asked the JUA in April for help in alleviating the difficulties faced by physicians who are coming to the JUA for coverage. He noted that most doctors have the “claims made” policy prevalent in the private market while the JUA offered only “occurrence” policies, with no coverage for prior acts. This difference could create coverage gaps for doctors making the transition from private carriers to the JUA.
The JUA board responded by adopting claims-made policies, with additional coverage for prior acts. Following is a capsule summary of the differences between the two major policy types:
Occurrence policy—covers claims arising from events – such as a surgical procedure – that happen while the policy is in force, regardless of when a claim is filed.
Claims-made policy—provides coverage only if both the event and the filing of the claim happen while claims-made coverage is in effect. Claims-made policyholders moving from one insurer to another commonly buy “prior acts” coverage. This insures a doctor against claims filed after the old policy expired and not covered by the new policy.
Because the potential for claims builds gradually over time, claims-made policies tend to be cheaper than occurrence policies in the first few years.
While occurrence policy premium rates went down for some specialties, they were increased in other areas of practice – the first JUA rate increase since 1995. An actuarial analysis, directed by the JUA, determined that rate increases for some physicians would be necessary to pay their future claims.