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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 the General Assembly 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 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 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 they have a $68.6 million profit. But Medical Mutual’s policyholders own it, the doctors Medical Mutual covers. So this profit would have gone back to the doctors had the state of Maryland not intervened.

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.”
Maryland may allow Medical Mutual to keep the money as long as it pays its doctors back in decreased premiums as opposed to cash payments. 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.

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