ORDER NO.: A02-125

 

 

STATE OF NEW JERSEY

DEPARTMENT OF BANKING AND INSURANCE

 

IN THE MATTER OF ADMITTED ) AMENDED
INSURANCE COMPANIES PROVIDING ) ORDER TO
MEDICAL MALPRACTICE INSURANCE ) SHOW CAUSE

This matter has been opened by the Commissioner of the New Jersey Department of Banking and Insurance ("Commissioner") pursuant to the authority of N.J.S.A. 17:1-15 and N.J.S.A. 17:29AA-1 et seq., and all powers expressed or implied therein; and

IT APPEARING that physicians, surgeons and other health care professionals in this State and the nation are experiencing a significant increase in insurance premiums and limited access to medical malpractice coverage. The effects of these compounding conditions are being felt in many different sectors of our economy, including the medical community; and

IT FURTHER APPEARING that the Department is aware that physicians, surgeons and other health care professionals are having difficulty finding coverage and that the affordability of medical malpractice coverage is a growing problem with wide-spread implications for the practice of medicine in this State; and

IT FURTHER APPEARING that as premiums for coverage continue to escalate, the lack of affordability may result in coverage gaps or the absence of coverage for many physicians, surgeons and health care professionals; and

IT FURTHER APPEARING that N.J.S.A. 17:29AA-11 provides that policy forms shall not be unfair, inequitable, misleading or contrary to law, nor shall they produce rates that are excessive, inadequate or unfairly discriminatory; and

IT FURTHER APPEARING that N.J.S.A. 17:29AA-12 permits the Commissioner to issue an order requiring that the rates for such line, kind, class, subclass or type of business be submitted to the Department for approval prior to becoming effective; and

IT FURTHER APPEARING that in accordance with N.J.S.A. 17:29AA-11 and 12, the Department is authorized to take steps to address these availability and affordability concerns by examining and directing actions regarding policy forms and rating systems to promote a healthy and competitive market; and

IT FURTHER APPEARING from the forms and rules on file with the Department that some of the programs and options provided below are already utilized in the marketplace. The Department believes that the programs and options contained in this Order should be offered market wide in order to address availability and affordability problems of medical malpractice insurance that currently exist in this State; and

IT FURTHER APPEARING that if an insurer believes that the programs and options that are already provided by some insurers as listed below should not be available market wide, then they should provide the Department with the basis and reasoning for their objections.

NOW, THEREFORE, IT is on this 1st day of July, 2002

ORDERED that insurers shall show cause why special risk rates for medical malpractice coverage when the annual premium is in excess of $10,000 should not be filed with the Department prior to becoming effective; and

IT IS FURTHER ORDERED that insurers shall show cause why current medical malpractice rating systems inconsistent with this Order should not be disapproved as filed; and

IT IS ALSO ORDERED that existing installment payment plans, risk management programs with credits or discounts, and deductible programs currently in force shall continue, provided that their terms are no less favorable to insureds than those listed below; and

IT IS ALSO ORDERED that insurers show cause why the following requirement should not apply to any medical malpractice policy issued to a physician, surgeon or other healthcare professional with a premium in excess of $10,000:

Insurers shall offer premium payment installment plans to insureds whose annual premium increase from 2001/2002 to 2002/2003 is 21% or greater. Insurers shall not charge interest but may charge no more than $25 per installment as a processing fee. Installment payments shall be made in intervals at least two months apart. The following installment payment plans shall be offered:

Premium Range
Plan
$10,001 to $80,000

Three installment payments

  • Initial payment = 50% of premium
  • Second payment = with 30% of premium
  • Third payment = 20% of premium
Above $80,000

Five installment payments

  • Initial payment = 30% of premium
  • Second payment = 25% of premium
  • Third payment = 20% of premium
  • Fourth payment = 15% of premium
  • Final payment = 10% of premium

IT IS ALSO ORDERED that insurers show cause why the following requirements should not apply to any medical malpractice policy issued to a physician, surgeon or other health care professional:

(a) Upon renewal, insurers shall offer at least a five percent credit or discount to those insureds who agree to complete an insurer-approved and/or sponsored risk management program. Insurers may request an audit of the insuredís practice as part of this program. Insurers shall offer a risk management program within six months of the date of this Order.

(b) Insurers shall offer a minimum $10,000 deductible. The deductible shall be accompanied by the appropriate, minimum premium credit as follows:

Indemnity Deductible and Accompanying Credits (on Premiums)
Credit
$10,000 per incident, $30,000 annual aggregate deductible:
5%
$25,000 per incident, $75,000 annual aggregate deductible:
10%
$50,000 per incident, $150,000 annual aggregate deductible:
15%
$100,000 per incident, $300,000 annual aggregate deductible:
25%
$150,000 per incident, $450,000 annual aggregate deductible:
30%
Intermediary deductible amounts shall be interpolated accordingly.

 

IT IS ALSO ORDERED that insurers that do not object to the requirements of this Order shall file manual rules that include the provisions of this Order, or more favorable provisions for their rating system. These manual rules shall apply to all new or renewal policies effective on or after July 1, 2002 and shall be filed with the Department by July 31, 2002 at the following address:

New Jersey Department of Banking and Insurance
Attn.: William Rader, Assistant Commissioner
PO Box 325
20 West State Street
Trenton, NJ 08625-0325

IT IS ALSO ORDERED that insurers that object to the requirements of this Order shall submit in writing the reasons for their objections and whether they request a hearing. These requests shall be submitted to the Department by July 22, 2002 at the following address:

Karen Garfing, Assistant Commissioner
Legislative and Regulatory Affairs
Department of Banking and Insurance
P.O. Box 325
Trenton, New Jersey 08625

Fax: (609) 292-0896

Email: legsregs@dobi.state.nj.us

 

This Order shall remain in effect until June 30, 2003.

/s/ Holly C. Bakke, Commissioner