State Court Finds in Favor of Health Care Providers Over Medical Malpractice Insurer

According to a state court’s medical malpractice insurance ruling, insurance Commissioner Michal Consedine must re-calculate assessments levied via the Medical Care Availability and Reduction of Error (MCare) program on health care providers. The re-calculation involves a complete assessment for the three years from 2009 through 2011.

The Commonwealth Court’s now-public decision ended with a 5-2 vote in favor of physicians and hospital officials over the supplemental medical malpractice insurance fund. The medical community alleged that the fund was keeping too much of its money. The ruling overturned the top insurance regulator in Pennsylvania, according to The Insurance Journal.

Rising medical malpractice claims

The MCare program, which began in 2002, was meant to assist providers in handling medical malpractice insurance rates and rising medical malpractice claims by providing them coverage in excess of what the law mandates health care providers must purchase on their own.

The question, however, involved whether or not state officials should have counted accrued balances in the MCare fund when calculating the fund’s yearly assessment. The state argued that the balances, which came to $104 million in 2008, should be excluded from the calculation of assessments; however, the petitioners say that, according to the law, those balances are, indeed, a part of the assessment formula, according to The Insurance Journal.

Today, assessments are set at 110 percent of the fund’s medical malpractice claims and expenses for the prior year, according to court documents. The ruling means that there will likely be a reduction on provider assessments, which have been increasing at a rate of 18-21 percent annually. How the surplus funds will be returned remains unclear, according to the Associated Press (AP); however, it is possible that the surplus will be applied against future assessments to ensure a more equitable distribution among current providers, according to Martin Ciccocioppo, vice president of research for the 17,000-member Pennsylvania Medical Society.

Reduction in the cost of insurance

Judge Mary Hannah Leavitt wrote that the State’s claim that permits these balances to accrue and provide stability for the MCare fund “misses the mark…. Stability is not a value expressed in the MCare act, but a reduction in the cost of medical malpractice insurance is an expressed value.”

Should claims and expenses use the entire fund in any year, the fund is legally authorized to borrow the money, with loan payments becoming part of future assessments, Judge Leavitt explained, according to The Insurance Journal. Judges Bonnie Brigance Leadbetter and Dan Pellegrini dissented. Judge Leadbetter noted that, had the Legislature intended for balances to be included in the assessment calculation, it would have specifically mandated that, the AP wrote.

About $129 million remained in the MCare fund’s accrued balance by year-end 2012, indicated Ciccocioppo, which excludes the $100 million that was transferred from the fund’s surplus to the state’s general fund to pay for other programs in 2009. The Commonwealth Court ruled the transfer illegal, the AP reported; an appeal by the state is pending before Pennsylvania’s Supreme Court.

A Pennsylvania Medical Society executive described the ruling as significant and confirms that MCare is a so-called “pay as you go” program for medical malpractice insurance that is not meant to carry surpluses. The decision, said Denise Zimmerman, the Society’s executive vice president, “establishes the rules of the game going forward in a way that we think is appropriate,” the AP reported.