ISMIE ordered to keep rates down

By Ann Knef | Mar 14, 2006

Stephen Burger, M.D.

The state's largest medical malpractice insurer has been directed to "target" a rate reduction of 3.5 percent beginning next year. And, in a report issued Tuesday, the Illinois Division of Insurance ordered ISMIE Mutal not to raise its premiums in 2006-2007.

"ISMIE takes strong issue with DOI setting an arbitrary rate reduction target for the next policy year (2006-2007)," said Harold L. Jensen, M.D., ISMIE chairman in a written statement.

"This insurer will continue to determine rates based on loss experience because we will not jeopardize the company's
financial viability."

Past president of the St. Clair County Medical Society, Belleville neurologist Stephen Burger, M.D., also questioned the arbitrary nature of a 3.5 percent rate reduction imposed on ISMIE. He said actuarial figures used to determine rates will not be available until next month.

"Where does that number come from?" he said. "It's not based on data because the data is not there yet."

The problem of skyrocketing malpractice rates for Illinois doctors is best exemplified in the Metro-East where more than 160 physicians have left their practices because insurance was too costly.

Only a handful of insurers providing coverage for physicians in Illinois remain -- ISMIE Mutual being the largest.

A hard-fought, and ultimately watered down medical liability reform bill enacted in Illinois last year was driven by an organized physician lobby in the state. The law caps non-economic damages at $1 million for hospitals and $500,000 for physicians.

On the upside for ISMIE Mutual, its proposed rate change for this policy year, 2005-2006, was accepted by the state regulatory authority.

"DOI's public findings confirm ISMIE's long-standing operational philosophy: our rates are based on the actuarially-estimated losses and expenses of running this company," said Jensen.

Burger said the DOI's report validates the rate writing policy of ISMIE, erasing skepticism that the insurer charged excessive rates.

"It validated the methology ISMIE's uses to determine rates," he said. "It shows that ISMIE should keep doing what it's doing. That it's on the up and up."

The order issued March 14 states that a rate reduction should happen only if it does not jeopardize the company's financial standing or ability to pay claims.

Jensen said the analysis performed by the Division of Insurance is "misguided" when it stated that ISMIE's market share interferes with other insurer's capacity for deciding rates and risks.

"ISMIE believes competition is healthy for the company and its policyholders," said Jensen.

"ISMIE grew in this market because commercial carriers fled the state in droves as their losses mounted. In stark contrast, ISMIE stayed, actively insuring physicians and successfully lobbying for medical litigation reform. ISMIE's premium rates in most specialty classes are recognized as generally the lowest among our competitors."

Jensen also said he was concerned about the Division of Insurance getting involved in the company's operational decision-making.

"The order sets unwise precedent by allowing state regulators to intrude in a company's day-to-day operational policies, separate and distinct from premium rates," said Jensen. "While some of DOI's operational directives affirm basic principles already in place at ISMIE, we dispute the notion that state regulators can, at will, step into an insurer's operational decision-making."

Burger said he doubted that the Division of Insurance has the ability or desire to get involved in ISMIE's operations.

"I don't think they'd be able to do it or have the capability," he said.

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