Malpractice insurers technically insolvent

<br>OKLAHOMA CITY (AP) _ Two companies that provide most of Oklahoma's medical malpractice insurance are technically insolvent and will be placed under the state Insurance Department's formal supervision.

Thursday, April 1st 2004, 12:00 am

By: News On 6

OKLAHOMA CITY (AP) _ Two companies that provide most of Oklahoma's medical malpractice insurance are technically insolvent and will be placed under the state Insurance Department's formal supervision.

Insurance Commissioner Carroll Fisher said Wednesday he has ordered the state oversight because the Physicians Liability Insurance Co. and Hospital Casualty Co. lack the reserves to pay anticipated future claims. Both are paying their bills.

Physicians Liability insures about 80 percent of Oklahoma's physicians and Hospital Casualty provides medical malpractice insurance for most of the state's rural hospitals.

``Many claims made against medical malpractice insurance policies last for several years,'' Fisher said. ``We need to make sure the companies are financially healthy, not only today but even 20 years from now.''

Fisher has granted large rate increases to the companies in recent months, but those rate hikes did not boost reserves enough to avoid insolvency.

Physicians Liability is a nonprofit subsidiary of the Oklahoma State Medical Association. Hospital Casualty is a subsidiary of the Oklahoma Hospital Association. Both companies are administered by C.L. Frates & Co.

``Obviously, with the impact these companies have on the medical community in Oklahoma, we must be cautious in anything we do,'' Fisher said. ``We felt this was the most prudent step to take at this time.''

The companies have been working with agency officials for several months, Fisher said.

The formal supervision will ensure that the agency provides strict oversight as the companies implement recapitalization plans, he said. The companies also must get the insurance commissioner's approval to enter into certain contracts, such as transfers of property, mergers with other companies or reinsurance agreements.

Fisher said he expects the companies to be rehabilitated so that the formal supervision can be discontinued. No target date for removal of the supervision has been set.

Fisher has approved a recapitalization plan for Physicians Liability that includes a 50 percent increase to premiums next year. In November, Fisher permitted the company to implement an 82.8 percent rate increase over the next three years to produce $40 million in additional income.

Jack Beller, medical association president, said the company paid out an average of $17 million in claims each year during the 1990s. That figure doubled to $34 million in 2002, and last year ``skyrocketed'' to $51 million, he said.

A doctor who paid $30,000 to the company in malpractice premiums in 2001 will pay $60,000 this year, Beller said. And next year, that doctor can expect to pay $90,000 under the proposed plan, which likely would take effect in July, he said.