Says N.J. Could Backstop Med-Mal Reinsurance

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By Daniel Hays

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NU Online News Service, July 25, 2:52 p.m.EDT?The results of a public hearing in two weeks couldlead New Jersey to act as a reinsurer for its troubled medicalmalpractice carriers, a state official said today.

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The Aug. 6 proceedings to take testimony on the availability ofreinsurance were scheduled after Princeton Insurance Company, thestate's largest medical malpractice insurer, notified theDepartment of Banking and Insurance it would stop writing newpolicies next month because it was unable to securereinsurance.

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Mary Cozzolino, special assistant to Banking and InsuranceCommissioner Holly C. Bakke, said the commissioner has the power tohave the state act as a backstop and provide reinsurance under a1975 law that created a Medical Malpractice ReinsuranceAssociation.

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Ms. Cozzolino said the MMRA statute has been used in the past toassist the medical malpractice insurance market, but not as areinsurer.

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Although Princeton, with the support of the commissioner,intends to halt new writings, Ms. Cozzolino noted that it willcontinue to cover its existing insureds and that there are sevenother companies that continue to write insurance for physicians inthe state.

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Ms. Bakke, in announcing the hearing, issued a statement thatnoted Princeton, during difficult market conditions this past year,"remained a committed player in the New Jersey marketplace.

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"As other carriers exited the market and qualified New Jerseyphysicians lost their professional liability insurance, Princetonabsorbed a considerable amount of that business. As a result ofthese efforts, Princeton's book of business currently consists of53 percent of the New Jersey marketplace."

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In notifying the department of its decision to suspend newwriting, Princeton cited its growth of business and "its inabilityto secure reinsurance at traditional levels (below $1 million) as afactor contributing to its current financial condition, making itnecessary to temporarily suspend writing new business."

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Ms. Bakke said that based on Princeton's large market positionand "concerns that traditional reinsurance is not readilyavailable, I am exercising my statutory authority to determine ifreinsurance for medical malpractice coverage is unavailable in theNew Jersey market.

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"Should a department hearing determine that reinsurance isunavailable, I am prepared to consider reactivating the MedicalMalpractice Reinsurance Association."

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The commissioner added that she is confident Princeton'sdecision is "both a temporary and a responsible one, in the bestinterest of current Princeton policyholders. Physicians covered byPIC should be assured that the company will continue to meet itsobligations to them, renew its existing book of business and coveradditional doctors who join practices Princeton now insures."

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The department, she said, supports Princeton's action "andbelieves that this is the most prudent course for the long-rangeprotection of Princeton insureds. Princeton continues to actresponsibly and cooperate fully with Department regulators as wework together to protect the interests of Princetonpolicyholders."

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As with many other states, New Jersey has seen physiciansdemonstrate at the state capitol in Trenton, protesting theirsoaring insurance rates.

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Ms. Bakke said Democratic Gov. Jim McGreevey has directed herdepartment to take immediate steps to assist physicians until amore comprehensive reform package can be adopted.

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She said that to date, the department has approved three newcarriers: Conventus, NJPURE and MIIX Advantage, and helped doctorshaving difficulty finding coverage through a Marketplace AssistanceProgram.

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Ms. Bakke also mentioned that she had issued an order to showcause which required insurance carriers to offer doctors options incoverage as a means of providing some premium relief in the shortterm.

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The department, she said, had addressed special problemsobstetricians have due to limited health maintenance organizationreimbursements and escalating premiums by encouraging HMOs toincrease reimbursements for high-risk obstetric patients. It hasalso initiated an aggressive program to ensure that physicians aregetting paid on time by HMOs, according to Ms. Bakke.

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