MedMutual agrees to $98 million settlement

Thursday, Dec. 20, 2007

MedMutual agrees to $98 million settlement

Premiums next year for doctors will remain at 2007 levels

by Alan Brody | Staff Writer

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ANNAPOLIS — Maryland’s largest medical malpractice insurer will reimburse nearly $100 million to the state and physicians to hold premiums at their current level for 2008.

The Medical Mutual Liability Insurance Society will return most of a $97.9 million dividend to a subsidy fund created by the state in 2005 to cushion rate increases in the face of a malpractice crisis. About $14 million of the dividend will be returned to doctors as a credit against future payments, along with an 8 percent rate reduction next year.

‘‘I think this is an entirely prudent decision,” said Maryland Insurance Commissioner Ralph S. Tyler. ‘‘The rate reduction that the company has decided to take is further confirmation of its view of the more favorable malpractice environment.”

The subsidy program, paid for with a 2 percent tax on health maintenance organizations in Maryland, helped stabilize rates at a time when many doctors faced skyrocketing premiums that threatened to drive them out of the state.

The state’s medical society applauded the agreement and news of stable rates for 2008.

‘‘Many physicians are being squeezed by rising expenses and poor reimbursement rates and, frankly, they can’t absorb escalating malpractice premium rates anymore,” MedChi Executive Director Martin P. Wasserman said in a statement.

The settlement is also a win for MedMutual, which will avoid a steep federal tax payment.

‘‘All of us are dedicated to improving things for doctors in the state,” said James L. Shea, counsel for MedMutual, which insures more than 6,400 physicians in Maryland.

The insurer said last month that being forced to return the full dividend could have hurt policyholders and restrict access to health care. MedMutual offered to reimburse the state about $32 million. The state has paid about $72.4 million in subsidies since 2005, when lawmakers overturned Gov. Robert L. Ehrlich Jr.’s veto of the HMO tax.

Tyler argued that the full dividend, which resulted from fewer malpractice claims than expected, should be used to refund the subsidy payments because it was earned during years when the insurer accepted the assistance for its physicians.

One physician who attended Thursday’s announcement said the agreement is a step in the right direction, but does not fully ease the burden of high malpractice premiums.

‘‘It hasn’t dropped down to pre-crisis levels,” said Carol E. Ritter, a gynecologist from Towson. Her premium jumped from $50,000 a year in 2003 to almost $100,000 a year later, she said, causing her to abandon her obstetrics practice. ‘‘This effort is starting to roll the ball back down in doctors’ favor.”

Doctors need the relief, MedChi President Bruce Smoller said in a statement. ‘‘Physicians have hit a wall, and even a modest increase would have forced some of them to close their practices.”