Conn. to Take Second Look at Insurer’s 90% Med-Mal Increase

Connecticut Insurance Commissioner Susan Cogswell has agreed to hire an independent actuary to review a controversial 89.6 percent medical malpractice rate filing that it previously approved in April.

The rate hike for GE Medical Protective Insurance Company (MedPro) went into effect for physicians July 1, after it was cleared by the Connecticut Insurance Department.

However the Connecticut Trial Lawyers Association, joined by two consumer groups and an individual doctor, last month asked Cogswell to halt the increase and review what they maintain is an “excessive” and “unconscionable” price increase.

MedPro spokesman John Novaria said his company believes its request is “entirely justified” and will defend it. His company is prepared to cooperate with the insurance department, he said.

The critics hired their own actuary to review MedPro’s filing. They maintain that the insurer did not use any of its own Connecticut or nationwide experience in establishing its latest rates, but instead referenced the rates being used by a competitor, Connecticut Medical Insurance Co., the state’s largest writer.

MedPro’s filing indicated that its own claims experience in Connecticut was too small to be reliable in rate-setting.

“I’ve seen them do this elsewhere,” said actuary Allan Schwartz, of AIS Risk Consultants Inc., in Freehold, N.J., who reviewed the filing on behalf of the critics. “If the state experience is favorable, they ignore it. It appears there is a bias going on here.”

Schwartz maintained that it is “standard actuarial procedure” for a company to first look at its own data. Market share size then can be used in deciding how much weight to give that local data, he added.

He said he has also reviewed MedPro filings in other states, including California and New Jersey, and witnessed a similar strategy of the company using whatever data supports the biggest increase.

Schwartz said his analysis shows that MedPro was making a “very high” profit of almost 50 percent in Connecticut—even before it sought to hike its rates by 90 percent.

Schwartz estimates that MedPro’s paid losses from 2000 to 2003 were only about 1 percent of written premium and that incurred losses were about 33 percent of earned premium. The result, he calculated, was an operating profit of $6.8 million, or almost 50 percent of earned premium.

“Given the high level of profits earned by MedPro, we believe it is unconscionable for MedPro to request an almost doubling of its rates, which will result in even more outrageously high profits at the expense of Connecticut physicians and surgeons, which could in turn adversely impact the health care available to the citizens of Connecticut,” the trial lawyers and consumer groups protested in writing to Cogswell.

MedPro’s Novaria acknowledged that his firm’s filing referenced Connecticut Medical Insurance Co.’s data because “we felt it would be irresponsible to base it on our own data” given that MedPro has such a relatively new and small market share. MedPro entered the state in 1999 and writes about 225 physicians who pay $11 million in premium in the state, while CMIC writes about $45 million.

Novaria declined comment on the company’s profit status in Connecticut.

Joining the trial lawyers in attacking the rate increase were the Connecticut Patients’ Rights Group, the Healthcare for All Coalition and a Waterbury physician, Dr. Thomas J. McNamee Jr.

They have asked Cogswell to stop the insurer from charging the higher rates and convene a hearing to review the filing.

Uncertainty about new hearing
Kate Kiernan-Pagani, spokesperson for Cogswell, said the department actuary had reviewed the MedPro filing before approving it in April but that Cogswell is now looking to hire an outside firm to review it again.

No decision has been made on whether to hold a public hearing, according to Kiernan-Pagani.

Formed in 1899, Medical Protective is today part of the GE Insurance Solutions family of companies. It writes more than 80,000 doctors and dentists nationwide with an emphasis on insuring “select” professionals.

MedPro enjoys high financial ratings. Standard & Poor’s has awarded it an “A+” (Strong), while A.M. Best assigned it an “A-” (Excellent) rating.