Pa. Finds Private Market Lacking for Higher Med-Mal Limits

July 11, 2005

Pennsylvania Insurance Commissioner Diane Koken has issued a report
concluding that there is not sufficient capacity to shift a greater proportion of medical malpractice coverage to the private market from the state Mcare Fund.

The report focuses on the ability of the current medical malpractice marketplace to offer an additional $250,000 of coverage for health care providers in the state. Based on the market analysis, Koken has concluded that there is not sufficient private capacity.

Health care providers in Pennsylvania are required to carry $1 million worth of medical malpractice insurance, the first 50 percent from a private insurance company and the remaining 50 percent from the state’s run Mcare Fund. Current law mandates that the limits be increased unless the insurance commissioner concludes that there is not adequate additional capacity.

The law proposes that, if the market could bear, the primary layer would increase and the Mcare layer would decrease. The law proposed that the next step would be 75 percent – or $750,000 – of coverage would come from the private market and 25 percent – or $250,000 – would be covered from the state fund. Eventually, if the market had the capacity, medical malpractice coverage would be provided entirely through the private market.

“An actuarial study by PricewaterhouseCoopers LLP shows that since the passage of Act 13 there have been improvements in the medical malpractice marketplace from a capacity standpoint – meaning there is more coverage available in the private market,” Koken said. “However, the market conditions, as found in the study, do not show sufficient additional capacity to support a ‘step-up’ in basic insurance limits at this point.

“While the data illustrates movement in a positive direction, I have concerns that need to be allayed before I could responsibly allow the primary marketplace to increase the primary malpractice insurance limit to $750,000 from $500,000.”

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