HCS HB 394 -- MEDICAL MALPRACTICE INSURANCE

SPONSOR:  Yates (Byrd)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Insurance
Policy by a vote of 16 to 0.

This substitute changes the laws regarding medical malpractice
insurance.  The substitute:

(1)  Subjects insurers writing professional malpractice insurance
to the provisions of Section 379.321, RSMo, relating to rating
plans filed with the Director of the Department of Insurance;
however, insurers writing medical malpractice insurance will also
be subject to the provisions of Sections 383.400 - 383.412;

(2)  Subjects malpractice insurers to Sections 383.100 - 383.112
relating to reports from medical malpractice insurers; Section
379.321 relating to commercial casualty rate filing requirements;
Sections 374.202 - 374.207 relating to the examination powers of
the department director; and Sections 383.400 - 383.412 relating
to notification, data reporting, and rating requirements;

(3)  Requires, beginning December 31, 2005, and annually
thereafter, the director to report to the General Assembly the
actual rates charged for malpractice insurance and a comparison
to the rates of the previous year;

(4)  Defines the term "insurer" to include every entity operating
under Chapter 383 including self-insured health care providers;

(5)  Subjects insurers that fail to report claims information as
required by Sections 383.100 - 383.125 to the penalties
applicable to insurance companies under Section 374.215.
Guarantee associations paying claims on behalf of an insolvent
insurer will be subject to the same reporting requirements as an
insolvent insurer;

(6)  Requires the additional first-year association charge of
policyholders to be in the form of cash or a cash equivalent and
not in the form of a promissory note;

(7)  Establishes a procedure by which medical malpractice
insurers, excluding surplus lines insurers operating under
Chapter 384 or any entity self-insuring its exposure to medical
malpractice liability, are allowed to make premium rate changes
otherwise presumed unreasonable under Section 383.405, including
prior notice to the director; a hearing, including evidence
presentation by the insurer and opponents, which may be a public
hearing at the director's discretion; an appeals process for the
insurer if the director determines the rate change to be
unjustified; and an insurer charging rates greater than 20% lower
than the market rate will not be subject to the hearing
requirement if the insurer files a certificate of actuarial
soundness with the director;

(8)  Creates penalties for violations and authorizes license
suspension upon the written order of the director after notice to
the insurer and a hearing;

(9)  Prohibits insurance companies and other entities providing
malpractice insurance to health care providers in Missouri from:

(a)  Increasing premium charges by more than 10% without 60
days' prior notice to the insured; however, notice is not
required if the premium change is due to the request of the
insured;

(b)  Refusing to renew policies without 60 days' prior notice,
unless the refusal to renew is based upon nonpayment of insurance
premiums, license termination or suspension, termination of the
insurer's reinsurance program, or a material change in the nature
of the insured's health care practice;

(c)  Ceasing to issue insurance policies without 180 days' prior
notice to the department; and

(d)  Requiring any insurer that fails to provide the required
notice, at the option of the insured, to continue the coverage;

(10)  Requires the department to establish, by May 30, 2006,
risk-reporting categories for medical malpractice insurance
premiums and regulations for their reporting;

(11)  Requires insurance companies and other entities providing
malpractice insurance in Missouri to report to the department, by
June 1, 2006, and annually thereafter, the premium rates charged
by category;

(12)  Requires the department, by December 31, 2008, and annually
thereafter, to establish and publish a market rate reflecting the
median of the actual rates charged for each risk-reporting
category for the preceding year;

(13)  Provides that, after January 1, 2009, insurance premium
rates charged by insurance companies and other entities providing
malpractice insurance in Missouri which are no greater than 20%
higher or lower than the published market rate will be presumed
reasonable, and rates greater than 20% higher or lower will be
presumed unreasonable;

(14)  Defines for purposes of Sections 383.407 - 383.412 the
terms "base rate" and "schedule rating or individual risk-rating
credits or debits";

(15)  Requires the department to establish reporting standards
for insurers to report base rates for health care provider
classifications in categories determined to be actuarially
appropriate.  The department will create a database, available to
the public, comparing base rates charged by insurers.  The
database may distinguish between rates for different types of
coverage;

(16)  Requires the department to establish reporting standards
for insurers or an advisory organization designated by the
department to report annually on medical malpractice insurance
premiums, losses, exposures, and other information the department
requires for the purpose of compiling a rate-making database.
The information collected will be used in assisting medical
malpractice insurers in developing future rates and will be
considered confidential.  Any information that identifies a
particular insurer will be removed;

(17)  Prohibits insurers writing medical malpractice insurance in
Missouri from applying schedule rating or individual risk-rating
credits or debits to an individual policy or unit or of exposure,
in the aggregate, in excess of the following percentages:  (a)
After July 1, 2006, 50%; (b)  After July 1, 2007, 40%; (c)  After
July 1, 2008, 30%; and (d)  After July 1, 2009, 20%.  The
aggregate debits and credits under the plan will be equal;

(18)  Requires, beginning January 1, 2007, any stock company
organized as provided by Section 287.902 for the purpose of
issuing medical malpractice insurance in Missouri to meet the
requirements of Chapter 379 regarding the organization of
insurance companies and the laws governing the organization of
private corporations.  The department director may waive capital
and surplus requirements for 10 years after incorporation, and
the company will not be subject to the membership requirements of
the Missouri Property and Casualty Insurance Guarantee
Association until after three years.  However, in no event will
the stock company become a member until its tenth anniversary.
No company, corporation, or association authorized to issue
medical malpractice insurance prior to August 28, 2005, may
incorporate under the provisions of this section;

(19)  Requires the department to promulgate rules defining the
term "claim" as it relates to medical malpractice;

(20)  Requires the department to study and report to the General
Assembly by January 15, 2007, on the feasibility and economic
impact of offering medical malpractice policies written to apply
to injuries which result from acts or omissions occurring during
the policy period.  Insurers are not mandated to write medical
malpractice insurance on an occurrence basis; and

(21)  Requires, beginning January 1, 2006, any long-term care
facility licensed under Chapter 198 to provide at least annually
to the Department of Health and Senior Services satisfactory
evidence of a medical malpractice insurance policy of at least
$500,000.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of $38,271
in FY 2006, $37,430 in FY 2007, and $38,388 in FY 2008.
Estimated Cost on Other State Funds of $22,460 in FY 2006,
$110,000 in FY 2007, and $85,000 in FY 2008.

PROPONENTS:  Supporters say that the bill will help lower the
price of medical malpractice insurance and keep physicians from
worrying about losing their personal assets in case of a huge
claim.  Insurers will have to notify their insureds 60 days prior
to cancellation, non-renewal, or for changes in premiums greater
than 10%.  The Department of Insurance will be able to track
rates and see any trends forming.  The department will be able to
make sure insurers are actuarially sound and still taking care of
their insureds.

Testifying for the bill were Representative Byrd; Missouri
Hospital Association; Missouri Association of Osteopathic
Physicians and Surgeons; Missouri State Medical Association; and
Missouri Academy of Family Physicians.

OPPONENTS:  Those who oppose the bill say that the rating
provision may create problems for insurers.  Tort reform that is
going through the General Assembly will help the markets and no
additional action is needed.  Competition may be hesitant to come
into the state if there is more regulations, and open competition
will take care of itself.  The 20% range on insurance rates may
cause insurers to actually raise their rates higher than they
actually need.

Testifying against the bill were Missouri Insurance Coalition;
and Professional Assurance.

OTHERS:  Others testifying on the bill say that they like the
principle behind the bill but would like to see it happen faster.
Nursing homes have not been able to get insurance and would like
to be included.

Others testifying on the bill were Healthcare Services
Corporation; and Republican Attorneys for Civil Justice.

Marc Webb, Legislative Analyst

Missouri House of Representatives
93rd General Assembly, 1st Regular Session
Last Updated August 25, 2005 at 1:19 pm