Maryland Takes Medical Malpractice Premiums from Medical Mutual (sort of)

Doctors may have a new opponent in their battle for lower medical malpractice premiums: the state of Maryland. As I wrote last month, Maryland has been paying subsidies to doctors to the tune of $80 million over the past three years as a part of the medical malpractice “reform” bill that was passed in 2004. The Baltimore Sun reports today that Maryland Insurance Commissioner Ralph S. Tyler ruled that a $68.6 million malpractice premium surplus, which Medical Mutual had accrued last year, is owed to the state of Maryland.

Back in 2004, doctors’ fervor for caps in medical malpractice cases reached a new high. To fan the flames, I’m convinced that Medical Mutual (easily the largest medical malpractice insurer in Maryland, covering about 75% of Maryland doctors) engaged in a little creative accounting and timely settlement negotiations that allowed Medical Mutual to pay out more during the time frame being examined by the Maryland legislature. The Maryland legislature was looking at this time frame to determine how much medical malpractice premiums had risen.

After they got their wish and the Maryland legislature passed a bill to further cap medical malpractice damages, it quickly became apparent that the rise in premiums was artificial, evidenced by this $68.6 million surplus. For most insurance companies, this means that they have a $68.6 million profit. But Medical Mutual is owned by its own policyholders, the doctors Medical Mutual covers. So this profit would have gone back to the doctors had the state of Maryland not intervened.

In the end, I don’t know what this really means. Commissioner Tyler’s ruling apparently left open an escape hatch, stating that “I have left the door open for Medial Mutual to rescind its dividend declaration and propose a solution to mitigate rates next year.”
In other words, Maryland may allow Medical Mutual to keep the money as long as it pays it doctors back in decreased premiums as opposed to a cash payment. This solution might be the best play for everyone, including plaintiffs’ attorneys because stable premiums might strengthen our case for removing the medical malpractice non-economic damages cap. [Setting aside the fact that it will never happen.] The truth is the only real loser would be Maryland taxpayers who are facing tax hikes next year and want their $80 million back.

  • J

    Well, after almost a decade of no claims and a low risk practice, I am forced to change from Legal Mutual for legal malpractice insurance.

    The premium has gotten too high. The company is deaf to my issue of being part-time and extremely low risk… one of their competitors will be happy to lower the premium.

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