Ohio’s First Woman Insurance Director Tackles Med-Mal Crisis

By | January 26, 2004

Ohio Insurance Director Ann Womer Benjamin’s first year in office since her appointment by Republican Gov. Robert Taft has been marked principally by her efforts to get a handle on the state’s medical liability crisis. Womer Benjamin represented the 75th District (Portage County-Part) for four terms in the Ohio House of Representatives before she was appointed as the Buckeye state’s first woman insurance director.

Her background as an estate planning and probate lawyer and member of the Cleveland Bar Association wouldn’t seem to augur well for the chances of tort law changes favorable to the insurance industry, but the director has emerged as a forceful advocate for limiting the number of frivolous medical malpractice suits. She also supported legislation designed to counter the Ohio Supreme Court’s controversial Scott-Pontzer decision’s unsettling impact on the auto insurance market.

Womer Benjamin spoke on the telephone with Insurance Journal Midwest on the afternoon of a victory for the department in the Ohio House, which had just unanimously passed HB 282, which would fund a medical liability underwriting association (MLUA), if necessary. (Editor’s note: For more on the hot issues this legislative session in Ohio and other Midwestern states, see our News Currents story, “Ohio Tort Reforms, Protecting CLUE Top Industry Agenda,” on page 6.)

Insurance Journal: What would you say are the biggest achievements of your administration in the year since you were appointed?

Ann Womer Benjamin: In terms of accomplishments in my first year I certainly think [HB 282] is a top accomplishment. The medical malpractice situation in Ohio has been our top priority over the last year. There have been growing concerns about the availability of such coverage, not just affordability. Our amendments to House Bill 282 would do two things. First, it would steer $12 million from the terminating JUA and preserve that money for medical malpractice initiatives including new underwriting associations. Second, the bill would authorize the superintendent of insurance to establish a medical malpractice liability underwriting association by rule if an emergency in availability was a real problem. The bill passed the Ohio house unanimously, and now it’s on to the Ohio Senate.

IJ: What role did you have in pushing this bill forward?

Womer Benjamin: We went seriously to the committee just before Thanksgiving. We worked with the House Insurance Committee and with sponsor Rep. Larry Flowers [R-19th] and the committee chair to put the changes in place. We worked with the industry, the Ohio Medical Association and the Ohio Hospital Association. The bill will now go to the Senate. The Senate committee is chaired by Scott Nein [R-4th]. We’ve had conversations with Sen. Nein and the president of the senate to iron out any problems they may have in the Senate.

IJ: Did you have any problems on the House side before getting the unanimous passage?

Womer Benjamin: We worked very hard on the House end with interested parties to address all conceivable concerns. One of the issues with the establishment of an underwriting association is how such an entity should be funded. The $12 million will provide seed money for it being operational. Beyond that you need to charge premiums. We also wanted to be conservative in our approach and establish a stabilization reserve fund, to serve as backup revenue in the unlikely event that premiums for some reasons were inadequate. The method of funding that reserve fund was a subject of ongoing debate and discussion. The $12 million for medical malpractice initiatives could include a medical malpractice underwriting association — the MLUA may not be established if the market doesn’t worsen. If the $12 million were to be used for MLUA, it would provide initial financing and premiums paid by insureds would serve to pay off future claims and then assessments would be possible against the insured beyond the premium to fund the stabilization reserve fund.

IJ: How would premiums be determined?

Womer Benjamin: The premiums would be set based on actuarial evidence. There would be a board overseeing operation of MLUA. The real bone of contention was the involvement of industry itself in MLUA. By negotiated agreement, the industry was taken out of potentially being the target of any assessment.

Insurance companies that provide the coverage initially were included as potential assessees in stabilization reserve fund, and ultimately they were taken out. The statute sets forth criteria and basically there has to be a significant problem with availability. This legislation does not address affordability of premiums as much as availability. I think it clearly is one of our most significant accomplishments in the past year. Also, it’s a significant initiative with regard to the medical malpractice issue.

IJ: What’s your view on the various tort reform proposals in the Ohio legislature? What further reforms are necessary to improve the market environment?

Womer Benjamin: Senate Bill 281, the tort reform bill, among the measures we as a department were required to implement were a review and analysis of a patient compensation fund. The bill called for the establishment of a medical malpractice commission which I chair. We worked with courts across the state and judges to develop a system for reporting lawsuit medical malpractice information to the department. That reporting is required under Senate Bill 281.

The number of lawsuits and the costs of those lawsuits, from the perspective of the department, we look at rate filings and we look at the justification for the rate filings. To a great extent the justification is the costs of torts and losses.

We’ve seen those costs rise. Rising costs have, based on our criteria, justified the increase in rates in medical liability coverage. Collecting this data, though, in greater detail across the state will help legislators, industry and interested parties in medical associations evaluate the need for further tort reform.

IJ: Tell us about the process involved in bringing about OHA Insurance Solutions Inc., the new medical liability provider formed by the Ohio Hospital Association in December? Was it an idea they brought to you or that you proposed to them?

Womer Benjamin: They brought it to us. I certainly would consider that another significant accomplishment. The market from our view may be improving. Outside groups like OHA are expressing interest in entering the medical malpractice market. They expressed interest in doing this, and they filed their initial papers sometime in early November 2003 and we worked with them to make sure their application was complete. They had to submit other documentation. We reviewed their organizational structure, financial structure, expected rate structure, and some other technical issues involved. Within two days of the filing it was complete and we were able to approve it.

IJ: Was the approval process expedited at all given the gravity of the med-mal situation in Ohio?

Womer Benjamin: It really depends on the circumstances. The OHA was very cooperative in getting the documentation to us that we needed. That cooperation does not always occur. There also maybe shortfalls in the application that they’ll take time correcting before we can act on it. We were interested in moving as quickly as possible because of the market situation, and OHA was as well.

IJ: The American Medical Association labeled Ohio as one of 18 states experiencing a crisis with regard to availability of medical liability coverage? Do you agree with that assessment: What else needs to be done to improve the situation?

Womer Benjamin: We have called it a crisis. To some extent, that may be because I have members of the health-care provider community complaining to me frequently. I’m not sure what the AMA’s criteria were. We do have five major companies offering coverage to about 72 percent of the market. We have 30 or so companies writing a million dollars or more. We have carriers offering the coverage here in Ohio.

The discussions I’ve had with some of the company leadership seem to indicate that the rates in Ohio are getting where they need to be to attract new companies into the market and to meet future claims experience they expect. Rates still are going up.

I think the tort reform enacted in ’02 will help over time. I expect the legislature will look further at tort reform initiatives. I think that some ability to discourage the number of lawsuits filed, sometimes without merit, is being pursued, as in the medical malpractice screening panel that would review cases before they go to trial. There’s a bill to that effect that we’re working on with the sponsor, Rep. Jean Schmidt [R-66].

For example, the medical malpractice commission I chair, we’ve had seven hearings. Members are from the medical community, the legal community, the insurance industry. We have heard testimony on a variety of subjects. Recently we had testimony from departments of insurance in three different states — Indiana, Wisconsin and New Mexico — that employed various measures to address medical malpractice coverage. I expect the commission to give a preliminary report early in 2004. A final report is not due until April 2005.

I think the commission will also work with the legislature on proposals which it may consider based on the testimony and hearing evidence we have heard over the last couple of years. I was a member the Ohio House for eight years. In that capacity, I would seek to develop my own viewpoint on tort reform.

I did support Senate Bill 281. So I will defer to legislative views on various issues, but I’m generally supportive of the concept of a medical review panel. There still are details that need to be worked out. Who comprises the panel? Who would organize the panel? When would the panel actually come into play? What impact would the decision of the panel have on litigation?

All of this only further strengthens my belief that we have to get a handle on the number of lawsuits. I know, for example, of a neurosurgeon in the Cleveland area, who was nonrenewed on his medical liability coverage and left to practice in another state.

History showed he had seven lawsuits against him in last several years. Six of those were dismissed without ever going to judgment. Nevertheless, because of the specialty he’s in, because those lawsuits generated costs for the company, the company felt they could no longer afford to cover him. Looking at the number of lawsuits filed against him, the company will then calculate the costs associated with lawsuits and make underwriting decisions accordingly.

That’s how insurance companies operate. I think it’s unfair for unmeritorious lawsuits — or lawsuits in which someone is named because they were on the periphery of the scene — I think it’s unfair for those kinds of cases figure so prominently in underwriting and rating.

The fact is that’s how it’s done. I’m not sure that companies should not consider those costs – they are legitimate factors in arriving at underwriting and rating decisions. Somehow we need to find a way to limit such lawsuits. Maybe six of those seven cases against the neurosurgeon would never have seen the light of day and generated the costs they generated for the company.

To comment on this story, e-mail: koreilly@insurancejournal.com.

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