Malpractice insurer will pay dividends, add clients
Dana Heupel
http://www.sj-r.com
The state’s largest medical malpractice insurer announced Monday that it will issue dividends for the first time ever and will accept new physician policyholders for the first time in four years, partly because of recent legal reforms.
ISMIE Mutual Insurance Co. expects a financial surplus primarily because the number of malpractice claims dropped by more than 25 percent in the last fiscal year, its chairman, Dr. Harold Jensen, said. Legislation enacted in 2005 limited court awards in medical malpractice cases to $500,000 against a physician and $1 million against a hospital.
Jensen said he believes the number of malpractice suits dropped because of a “halo effect” caused by publicity about the new laws and reports of abuses of the judicial system.
“We see very positive signs that things are improving here, that litigation reforms are really beginning to work,” he said in a prepared statement.
However, Jensen, a Frankfort internist, said in an interview Monday, “The number of cases has diminished, but the cost per case is still going up.”
Malpractice awards averaged about $600,000 last year, he said, and ISMIE still has a backlog of 4,000 to 5,000 lawsuits that were filed before the 2005 law went into effect and are not subject to the caps.
Although the state Division of Insurance last year ordered ISMIE to pay dividends to policyholders, Jensen said the company already had been developing a program to do that for several years. He said ISMIE officials suggested the dividends to state regulators during earlier rate hearings.
A spokeswoman for the Division of Insurance could not be reached Monday.
ISMIE will issue the dividends to policyholders on July 1, the start of the company’s new fiscal year, Jensen said. The amount of the dividend has not yet been determined.
Along with the dividends, which will be deducted from policyholders’ annual premiums, ISMIE will insure 400 new physicians beginning in April. The company, which now covers about 3,000 Illinois doctors, placed a moratorium on most new policies in 2003 because of the number and size of malpractice verdicts at that time, Jensen said.
“I think we will get a lot of applications,” Jensen said, because the physician-owned insurance company typically offers low premiums.
ISMIE was founded in 1976 by the Illinois State Medical Society, although it has severed most ties to the group, he said. As a mutual insurance company, profits above operating costs and necessary capital reserves are shared with policyholders.
Despite the lower number of malpractice verdicts, “the problem hasn’t gone away. The judicial system is still broken,” Jensen said.
ISMIE is working to enact further legislation that could, for instance, place more stringent restrictions on who could testify as a medical consultant, he said, or create physician panels to advise judges and juries on complex medical issues.
The company also intends to act as a “friend of the court” in a recent case challenging the constitutionality of the 2005 law, Jensen said. Lawyers from ISMIE and other malpractice reform groups will help the Illinois attorney general’s office defend the law before the Illinois Supreme Court, he said.
The lawsuit, filed in Cook County, involves a toddler who suffered severe brain damage when she was deprived of oxygen during birth. The plaintiffs contend that the doctor and the Melrose Park hospital staff did not act quickly enough when the mother developed problems during labor.
Chicago attorney Jeffery Goldberg, who represents the plaintiffs, said Monday he believes ISMIE’s intended dividends result from financial restrictions that the new law placed on medical malpractice insurers, not from the caps on jury awards.
“Nationwide, caps have not been a cure for medical malpractice insurance problems,” Goldberg said. “Rather, it has been insurance regulation that has done more to protect the consumers and protect policyholders.”
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