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Insurance
company under fire
- Former industry regulator blames costs on
premium hikes.
By
MARY MASSINGALE STATE CAPITOL BUREAU
A former top official with insurance regulatory agencies in two other states said Wednesday that Illinois' medical malpractice conundrum results from unjustified premium hikes by an insurer with a political agenda.
Jay Angoff of Jefferson City, Mo., told members of the House Judiciary Civil Law Committee that ISMIE Mutual Insurance Co. has raised premiums more than 40 percent in the past two years while paying out less in claims.
Angoff served as director of the Missouri Department of Insurance and deputy director of the New Jersey Department of Banking and Insurance. He testified before lawmakers at the request of committee chairman Rep. John Fritchey, D-Chicago, and paid his own expenses, he said.
Angoff also criticized ISMIE and the Illinois State Medical Society for being in each other's pockets and using the same lobbyist to represent them in negotiations.
"You've got the same person representing both the buyer and the seller to a transaction," Angoff said. "That's wacky. Obviously you can't serve both masters. There is one master, and the master is the insurance company and its commitment to tort reform."
Owned and operated by physicians, ISMIE was launched by the state medical society in 1976. The company insures nearly 14,000 doctors across the state.
Dr. Harold Jensen, chairman of ISMIE, discounted Angoff's testimony as "cherry-picking" data to create a "conspiracy theory." Jensen said Angoff's figures do not include settlements or the insurer's 5,000 pending cases.
"If there is so much profit in ISMIE, which is what he was saying, we have to then ask where is it?" Jensen said. "We take money in the front as premiums, we run it out the other end in payments and we put the rest in reserves. Our surplus is adequate but has diminished because we're forced to reach into surplus to pay for this."
Lawmakers on the House committee are seeking to sift through often-conflicting data surrounding medical malpractice re-form and have scheduled testimony from all involved parties during the coming weeks. Doctors and hospitals, who are usually aligned with Republicans, blame high jury awards for pain and suffering. Trial lawyers and plaintiffs' advocates, aligned with Democrats, blame an unregulated insurance industry.
Using data from ISMIE's annual statements to policyholders, Angoff told committee members the insurer's paid losses from 2000 to 2003 stayed nearly steady, increasing from $163.2 million to $166.3 million. Meanwhile, the premiums written during the same period increased from $164 million to $360.9 million. For the first nine months of 2004, the paid losses stood at $110 million, while the premiums written tallied $390.7 million, Angoff said.
Jensen, however, said the number of claims reported against policyholders increased 46 percent from 2001 to 2003, while the average indemnity payment per claim increased 24 percent - from $474,000 in 2001 to $589,000 in 2003.
Angoff also told panel members that the medical malpractice insurance industry has a high-premium crisis every 10 to 15 years because of its dependence on interest rates that fluctuate with the stock and bond markets. Malpractice insurers were dealt another blow when the Sept. 11, 2001, terrorist attacks worsened the global reinsurance industry, Angoff said. Insurers seek reinsurance to cover costs from excess losses.
Talk of medical malpractice reform dogged lawmakers during last year's seven-month extended legislative session, with negotiations breaking down when a budget agreement was reached in July. A mediator appointed by Gov. Rod Blagojevich in September has had little success.
Doctors, insurers and hospitals stand firm on seeking limits on non-economic damages, while trial lawyers argue against such caps. The Illinois Supreme Court previously has ruled that caps are unconstitutional.
Fritchey said the goal of the committee is to "get past the rhetoric and put something before this body before we adjourn."
"What we can't do anymore is simply have finger-pointing from all four sides," Fritchey said. "At the end of the day, this is not about doctors, lawyers, hospitals and insurance companies - it's about patients."
Mary Massingale can be reached at 782-6882 or mary.massingale@sj-r.com.
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