Introduced by Representative Jewett of Ripton
Subject: Banking and insurance; medical malpractice insurance
Statement of purpose: This bill proposes to require medical malpractice insurers to obtain the approval of the commissioner of banking, insurance, securities, and health care administration for proposed rate increases of 10 percent or more and to hold hearings on such increases at the request of any interested person. The bill would allow any person to intervene and authorize courts to award advocacy and witness fees if the person has made a substantial contribution to the proceeding. The bill also would allow the commissioner to determine that the surplus of a medical malpractice insurer is excessive and to not approve a rate increase until the surplus is no longer excessive.
AN ACT RELATING TO MEDICAL MALPRACTICE INSURANCE
It is hereby enacted by the General Assembly of the State of Vermont:
Sec. 1. 8 V.S.A. subchapter 1A of chapter 128 is added to read:
Subchapter 1A. Medical Malpractice Insurance
§ 4696a. STANDARDS FOR RATES
(a) Rates for medical malpractice insurance shall not be excessive, inadequate, or unfairly discriminatory. No rate shall be held to be excessive unless such rate is unreasonably high for the insurance provided or expenses are unreasonably high in relation to services rendered. No rate shall be held to be inadequate unless such rate is unreasonably low for the insurance provided, and the continued use of such rate endangers the solvency of the insurer using the rate.
(b) Rates shall not be held to be unfairly discriminatory unless price differentials fail to reflect equitably the differences in expected losses and expenses.
(c) A medical malpractice insurer shall consider past and prospective loss experience solely within this state. However, if there is insufficient experience within this state upon which a rate can be based, the insurer may consider experience within any other state or states which have a similar cost of claim and frequency of claim experience as this state. The insurer shall expressly show the rate experience it is using in its rate filing. In considering experience outside this state, as much weight as possible shall be given to state experience.
§ 4696b. RATE ADMINISTRATION
(a) The commissioner shall adopt rules setting forth standards that insurers shall adhere to in calculating their rates. Such rules shall relate to rate of return, expenses, loss development, trend, and any other matter deemed reasonable and appropriate by the director.
(b) The commissioner shall examine and review the rates applicable to different medical specialties. The commissioner may hold a public hearing on any filing proposing different rates for different medical specialties in order to determine the extent to which the rate for each medical specialty is based on the experience of that specialty. The commissioner may issue appropriate orders in connection with such hearings.
§ 4696c. FILING OF RATING INFORMATION
(a) Every medical malpractice insurer shall file with the commissioner every manual of classifications, rules, and rates, every rating plan, and every modification of any of the foregoing which it proposes to use in this state.
(b) The expense provisions included in the rates to be used by a medical malpractice insurer shall reflect the operating methods of the insurer and, so far as is credible and reasonable, its own actual and anticipated expense experience.
(c) The rates to be used by a medical malpractice insurer shall enable the insurer to earn a reasonable but not excessive rate of return. In determining a reasonable rate of return, consideration shall be given to all investment income, including investment income on surplus, that is reasonably attributable to medical malpractice insurance in this state.
(d) Every filing shall state the proposed effective date thereof, shall indicate the character and extent of the coverage contemplated, and shall contain supporting information. Such supporting information may include the experience or judgment of the insurer making the filing; its interpretation of any statistical data it relied upon; the experience of other insurers; and any other factors which the insurer deems relevant. Such supporting information shall comply with the standards adopted pursuant to section 4696b of this title. All such information shall be available for public inspection when filed.
§ 4696d. REVIEW OF FILINGS AND PARTICIPATION BY INTERESTED
(a) Whenever a medical malpractice insurer files a proposed rate change, the commissioner shall give notice, by any practicable means and to the extent practicable, to both insureds of the insurer making the filing and the general public.
(b) The proposed rate change shall be deemed approved 30 days after public notice unless within such 30-day period:
(1) the commissioner disapproves the filing; or
(2) the proposed rate change is a rate increase of l0 percent or more, in which case the commissioner shall hold a hearing upon the request of any interested person. The commissioner may also hold a hearing upon his or her own motion. The commissioner shall hold a hearing within 30 days of receiving a request for a hearing and shall issue a decision approving the filing, disapproving the filing, or approving the filing subject to conditions the commissioner deems reasonable within 30 days of the completion of the hearing.
(c) In connection with a hearing on a proposed rate change, any party, including any person requesting the hearing, shall have the right to:
(1) serve informational requests upon any party;
(2) call witnesses;
(3) offer evidence, including rebuttal evidence;
(4) cross-examine any witness that another party or the commissioner calls; and
(5) present summation and argument.
§ 4696e. CONSUMER PARTICIPATION
(a) Any person may initiate or intervene in any proceeding permitted or established pursuant to this subchapter, challenge any action of the commissioner under this subchapter and enforce any provision of this subchapter.
(b) The commissioner or a court shall award reasonable advocacy and witness fees and expenses to any person who demonstrates that:
(1) the person represents the interests of consumers; and
(2) the person has made a substantial contribution to the adoption of any order, regulation, or decision by the commissioner or a court. Where such advocacy occurs in response to a rate application, the award shall be paid by the applicant.
§ 4696f. SURPLUS-CONSIDERATION IN RATEMAKING
(a) The commissioner may determine the surplus of a medical malpractice insurer to be excessive if:
(1) the surplus is greater than the appropriate risk-based capital requirements as determined by the commissioner from the immediately preceding calendar year; and
(2) after a hearing, the commissioner determines that the surplus is unreasonably large.
(b) If the director has determined that the surplus of a medical malpractice insurer is excessive, the commissioner shall not approve a rate increase sought by such insurer that is reasonably anticipated to result in an increase in surplus until the commissioner determines that the surplus of such insurer is no longer excessive.
§ 4696g. UNLAWFUL INDUCEMENTS
(a) An insurer shall disclose any payment or any inducement to any association of health care providers or to an affiliate of an association of health care providers in connection with or arising from the sale of insurance.
(b) For purposes of this section, an “affiliate” of an association of health care providers is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by or is under common control with such association.
The Vermont General Assembly
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