The Oklahoma House of Representatives has voted to give the state’s major medical malpractice insurer two more years to build up its reserves before state regulators intervene.
House Bill 1566, by State Rep. Dan Sullivan, would exempt the Physicians Liability Insurance Company from state regulations requiring insurers to maintain sufficient reserves to pay off all potential claims.
“This allows the company to continue its recapitalization plan,” said Sullivan, R-Tulsa.
During the 2004 legislative session, Oklahoma lawmakers voted to exempt PLICO, the state’s largest provider of medical malpractice insurance, from laws requiring insurance companies to maintain “adequate reserves” to cover all current and anticipated claims.
The exemption was designed to allow PLICO time to build up its reserves through premium increases, which would be used in part to buy reinsurance policies that would cover any catastrophic claims that arose unexpectedly.
At the time, PLICO did not have reinsurance coverage.
Had state lawmakers not exempted the company from state regulations, PLICO would have been required to raise $143 million immediately or state regulators would have placed the company into receivership.
PLICO officials have said they can pay all existing claims but lack the reserves to cover all potential future claims. At the end of 2004, Physicians Liability Insurance Company increased its rates by up to 55 percent, although officials promised no additional increases would occur in 2005 and 2006.
Sullivan said the survival of PLICO, which provides medical malpractice coverage to roughly 70 percent of Oklahoma doctors, is crucial to the state’s health care system.
“A healthy PLICO is good for Oklahoma,” Sullivan said. “Without the liability coverage this company provides, we could see a mass exodus of doctors from Oklahoma.”
He said recent changes at PLICO had reduced the company’s ability to complete its recapitalization plan in the time frame approved by lawmakers last year.
For example, Sullivan said PLICO recently began offering a policy providing up to $500,000 in malpractice coverage. Previously, the company’s minimum policy provided $1 million in coverage and generated larger premiums than the new $500,000 policies.
“That decreased the amount of premium that they’re bringing in, so PLICO needed additional time to recapitalize,” Sullivan said.
Under current law, PLICO would have been required to complete its recapitalization by Jan. 1, 2006. Under the provisions of House Bill 1566, that deadline would be extended to Dec. 31, 2008.
House Bill 1566 passed the Oklahoma House of Representatives on a 95-2 vote. It now proceeds to the Oklahoma Senate.
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