Joint Committee on the Health Care Stabilization Fund

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Joint Committee on the Health Care Stabilization
Fund

• July 6, 2005
• Missouri Department of Insurance

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Kansas Health Care Stabilization FundHistory

• History
• Mid-1970s Kansas faced a medical malpractice
  insurance crisis
• 1976 - SB 646 Health Care Provider Insurance
  Availability Act was signed into law
• Established mandatory malpractice coverage limits
• Created the Health Care Stabilization Fund to
  provide excess professional liability coverage
  above the basic coverage level provided by
  private insurers and to provide tail coverage
  to qualified inactive health care providers
• Created the Health Care Provider Insurance
  Availability Plan to provide basic coverage for
  health care providers who cannot obtain coverage
  from the private market (Similar to Missouris
  Medical Malpractice Joint Underwriting
  Association JUA)

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Kansas Health Care Stabilization FundMandatory
Malpractice Coverage

• All Kansas health care providers are required to
  maintain medical malpractice insurance as a
  condition of licensure
• Minimum required coverage limits are 200,000 per
  claim / 600,000 annual aggregate
• Providers who cannot obtain coverage in the
  voluntary market may obtain coverage from the
  Health Care Provider Insurance Availability Plan

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Kansas Health Care Stabilization Fund

• A health care provider is defined by K.S.A.
  40-3401 (f) as
• M.D.s
• D.O.s
• D.C.s
• D.P.Ms
• C.R.N.A.s
• Hospitals
• Ambulatory surgical centers

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Kansas Health Care Stabilization FundFund
Coverage

• The Fund provides excess coverage ONLY
• Provider may select one of 3 excess coverage
  options
• 100,000 per claim/ 300,000 annual aggregate
• 300,000 per claim / 900,000 annual aggregate
• 800,000 per claim / 2,400,000 annual aggregate
  

Most Popular
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Claim Analysis - 1 Million Claim
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1m PER CLAIM/3m Aggregate
Insurance Costs 1,000,000/claim.Primary Insurer 3,000,000 aggPrimary Insurer Per Claim Costs 200,000.Primary Insurer 800,000.Fund ________ 1,000,000 per claim Aggregate Costs 600,000..Primary Insurer 2,400,000...Fund __________ 3,000,000 aggregate

• Cost of 1m/3m Insurer Policy gt Cost of
  1m/3m from Fund Insurer

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Kansas Coverage Costs for 800,000 - 2,400,000
Stabilization Fund Coverage
Fund Class Group 1st Yr. 2nd Yr. 3rd. Yr. 4th Yr. 5 Yrs.
1 203 522 822 909 1,015
2 300 770 1,214 1,343 1,499
3 407 1,054 1,661 1,834 2,050
4 468 1,210 1,908 2,107 2,357
5 551 1,421 2,240 2,472 2,766
6 709 1,829 2,882 3,179 3,558
7 528 1,363 2,148 2,370 2,651
8 1,160 2,995 4,720 5,209 5,828
9 1,326 3,420 5,389 5,949 6,654
10 1,752 4,519 7, 121 7,862 8,793
11 2,405 6,213 9,789 10,805 12,085
12 108 280 442 487 546
13 173 441 698 770 861
14 491 1,269 2,002 2,209 2,472
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Claim Analysis - 1 Million Claim

• Physician 1
• Claim 1 million
• Coverage purchase is 1 million/3 million

NO FUND FUND Coverage FUND (Basic Coverage Elected)
Primary Insurer 1,000,000 1,000,000 200,000
Provider 0 Higher Insurance Costs 0 Higher Insurance Cost 0 Lower Insurance Costs
Fund N/A 0 800,000
TOTAL 1,000,000 1,000,000 1,000,000
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Claim Analysis 2 Million Claim
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Claim Analysis - 2 Million Claim

• Physician 2
• Claim 2 million
• Coverage purchase is 1 million/3 million

NO FUND FUND Coverage FUND (Basic Coverage Elected)
Primary Insurer 1,000,000 1,000,000 200,000
Provider 1,000,000 Higher Insurance Costs 200,000 Higher Insurance Costs 1,000,000 Lower Insurance Costs
Fund N/A 800,000 800,000
TOTAL 2,000,000 2,000,000 2,000,000
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Insolvency
Traditional JUA 383 Stabilization Fund
Guaranty Fund (Not a promise of full recovery) Deficit spread among all property and casualty insurers Members are assessed to make up the deficit Member providers may be assessed deficit in subsequent year (SB 433)
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Kansas Health Care Stabilization FundAdditional
Protections

• The Fund provides coverage for prior acts, or
  tail coverage, for all claims brought against
  qualified inactive health care providers
• The Fund administers the basic-coverage
  self-insurance programs for persons engaged in
  qualified residency training programs and the
  University of Kansas Foundations and their
  full-time physician faculty

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Kansas Health Care Stabilization
FundOrganization

• Agency of the State of Kansas
• Administered by a 10-member Board of Governors
• 3 medical doctors
• 2 osteopaths
• A registered nurse anesthetist and
• A chiropractor
• Members are appointed by the Insurance
  Commissioner to staggered 4-year terms

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Kansas Health Care Stabilization FundFunding

• Fund receives no general revenue
• Completely funded by a surcharge levied on all
  active health care providers
• Surcharge amount is set by the Board through a
  rate classification system
• The amount paid is a calculation based upon
• Specialty
• Years of compliance
• Selected level of Fund coverage

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Kansas Coverage Costs for 800,000 - 2,400,000
Stabilization Fund Coverage
Fund Class Group 1st Yr. 2nd Yr. 3rd. Yr. 4th Yr. 5 Yrs.
1 203 522 822 909 1,015
2 300 770 1,214 1,343 1,499
3 407 1,054 1,661 1,834 2,050
4 468 1,210 1,908 2,107 2,357
5 551 1,421 2,240 2,472 2,766
6 709 1,829 2,882 3,179 3,558
7 528 1,363 2,148 2,370 2,651
8 1,160 2,995 4,720 5,209 5,828
9 1,326 3,420 5,389 5,949 6,654
10 1,752 4,519 7, 121 7,862 8,793
11 2,405 6,213 9,789 10,805 12,085
12 108 280 442 487 546
13 173 441 698 770 861
14 491 1,269 2,002 2,209 2,472
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Kansas Medical Malpractice Liability Industry
Requirements

• Insurers who provide coverage to Kansas health
  care providers must provide prior acts coverage
  for all periods of Fund compliance
• Eliminates the need for providers to purchase
  reporting endorsement coverage (tail coverage)
  when changing primary insurance carriers
• All basic insurers must provide overall or total
  coverage for all professional services rendered
  by a Kansas health care provider

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Potential Stabilization Fund Benefits

• Lower Coverage Costs
• Lower Industry /Provider Exposure
• Enhanced Likelihood of Injury Compensation

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Potential Stabilization Fund Concerns

• Additional bureaucratic layer
• Slower claims processing
• Solvency issues
• Additional competition in the market

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Current Medical Malpractice Carriers in Missouri

• Private Market (Approximately 8- Physicians
  Surgeons)
• Chapter 383 Companies (4)
• Missouri Doctors Mutual Insurance Company
• Missouri Physician Mutual
• Physicians Professional Indemnity Association
• Missouri Hospital Plan (Insures hospitals and
  physician employees)
• Medical Malpractice Joint Underwriting
  Association (1)

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383 vs. JUA vs. Stabilization Fund
383 Company JUA Stabilization Fund
Organization Type Non-profit mutual, Policyholders are members Association of Property and Casualty Insurance Companies Within MDI (SB 433)
Market Function Provider-owned insurer Insurer of last resort Potentially Limited Duration (May be dissolved by MDI) Excess coverage for all health care providers
Type of Policy (1) Claims Made (2) Occurrence Occurrence Claim covered if insured in compliance with Fund on both date claim is made and date of incident
Insolvency Members assessed to make up deficit Deficit spread among all property and casualty insurers Potential for additional provider assessments in subsequent years
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Physicians Insured by 383s

• Missouri Doctors Mutual Insurance Company
• 74 physicians
• Missouri Physician Mutual
• 2,112 physicians
• Physicians Professional Indemnity Association
• 467 physicians

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Physicians Insured By JUA

• Physician portion is
• 2 Neurosurgeons
• 2 Ophthalmologists (with major surgery)
• 3 Internal medicine with no surgery
• 1 Cardiovascular disease with minor surgery
• Insures 44 long-term care policies and 110
  long-term care facilities

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Market Comparison (2004)

• Estimated Current Physicians within Missouri
  14,346
• Total 383 Physicians 2,653
• Total JUA Physicians 8
• Estimated Physicians In Voluntary Market
  11,685

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383 Direct Premium Written and Earned (2004)

• Missouri Doctors Mutual Insurance Company
• Written 1,372,534 earned 804,660
• Missouri Physician Mutual
• Written, 37,717,350 earned 33,773,458
• Physicians Professional Indemnity Association
• Written 8,102,880 earned, 4,598,253
• Missouri Hospital Plan (Insurers hospitals only)
• Written 34,169,082 earned, 18,319,582
• An estimated average annual premium charged to a
  physician by a 383 during 2004 is 17,788.

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Missouri Physicians By County/Specialty
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Missouri v. Kansas Stabilization Fund
State Agency Governed By Funding Source Provider Participation Primary Insurance Required Fund Coverage Limits Tail Coverage
Missouri Within MDI Governing Board Membership fee/Surcharges Mandatory 200,000/ 600,000 800,000/ 2,400,000
Kansas Health Care Stabilization Fund Separate Agency Board of Governors Surcharges Mandatory 200,000/ 600,000 Optionsa 100,000/ 300,000b 300,000/ 900,000c 800,000/ 2,400,000above primary limits Provided by Fund
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10 Funds Created Nationwide

• Florida Patients Compensation Fund?
• Fund closed as of 1983
• Indiana Patients Compensation Fund
• Kansas Healthcare Stabilization Fund
• Louisiana Patients Compensation Fund
• Nebraska Excess Liability Fund
• New Mexico Patients Compensation Fund
• Pennsylvania Medical Care Availability and
  Reduction of Error Fund
• Fund scheduled to be gradually phased out by 2009
• South Carolina Medical Malpractice Patients
  Compensation Fund
• Wisconsin Patients Compensation Fund
• Wyoming Medical Liability Compensation Account
• Enacted but not established
• ? List does not include two states, Florida and
  Virginia, which have implemented special funds
  for the payment of medical claims involving
  birth-related defects only.
• Fund under the jurisdiction/oversight of the
  Department of Insurance

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Thank you!

• Disclaimer Information provided in presentation
  is based on 2004 data and gathered by the
  Department from various resources. Although all
  attempts have been made to verify the accuracy of
  the information provided, the Department does not
  vouch for the accuracy of external information
  provided. The information provided is subject to
  change and/or revision and is intended for
  informational purposes only.
• For further information, please feel free to
  contact Maria Cauwenbergh, Legislative
  Coordinator, Missouri Department of Insurance at
  Maria.Cauwenbergh_at_insurance.mo.gov.