The 2nd meeting of the Interim Joint Committee on Banking and Insurance was held on Tuesday, October 22, 2002, at 1:00 PM, in Room 149 of the Capitol Annex. Representative James Bruce, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator Tom Buford, Co-Chair; Representative James Bruce, Co-Chair; Senators Lindy Casebier, Julie Denton, Ray Jones II, Marshall Long, R.J. Palmer II, Albert Robinson, and Dan Seum; Representatives Sheldon Baugh, James Comer, Brian Crall, Ron Crimm, Robert Damron, Mike Denham, Joseph Fischer, James Gooch, Dennis Horlander, Don Pasley, Steve Riggs, Dottie Sims, Roger Thomas, Ken Upchurch, and Susan Westrom.
Guests: David Powell, Hopkinsville, KY, Charles Powell, Franklin, KY, Tyler Thompson, Chuck Adams, Kentucky Academy of Trial Attorneys, Preston Nunnelley, M.D., Marty White, Kentucky Medical Association, Steve Hanson, M.D., Kentucky Hospital Association, Joel Whitcraft, Medical Protective Company.
LRC Staff: Greg Freedman, Emily Bottoms, Rhonda Franklin, David Thomas, and Jamie Griffin.
The minutes of the September 9, 2002, meeting were approved.
David Powell addressed the committee regarding the increased cost for health insurance for small employers. Mr. Powell stated that he and his brother, Charles Powell, run a family owned and operated small business with 12 employees, but are considering selling the business or moving the business to Tennessee because of the high cost of health insurance for their company. Mr. Powell stated that they have seen their premiums increase from $20,000 to $105,00 in the last two to three years with Anthem. He stated that if there is not a resolution to the health care insurance problem in Kentucky, he feels many businesses will be contemplating selling or moving out of state. He asked the committee to please find a resolution to the problem.
Representative Ron Crimm stated that the Powell’s were not alone and he realized it is a real problem for small business people.
Representative Sheldon Baugh stated that he understood the problem that the Powell’s are having and understood the confusion involved dealing with the insurance company. He stated that he was aware of companies moving because of this problem.
Steve Hanson, M.D., Kentucky Hospital Association, and Preston P. Nunnelley, M.D., Kentucky Medical Association, addressed the committee regarding medical malpractice insurance costs.
Preston Nunnelley stated with the rising costs of medical malpractice insurance in Kentucky the state runs the risk of a physician shortage. He stated that when doctors leave a state everyone suffers and the access to care is threatened. He stated that access to care is crucial especially in rural areas. He stated that when one Obstetrician leaves Kentucky, 140 women are left wondering who will deliver their babies. He stated that medical education also suffers. He stated that the medical liability system costs America $22 billion dollars per year. He stated that it also affects the quality of care, for example, referral patterns break down, the ER becomes a portal for a range of services it was never intended to provide, and system overload. He stated that the Kentucky Medical Association is working on a legislative package for 2003. He stated that they want to continue to focus on patient safety, educating patients about the severity of the problem, and gathering data to support the need for medical liability reform.
Steve Hanson, M.D., Kentucky Hospital Association, stated that patient care services are at risk and they need to work together to develop a good system.
Representative Steve Riggs asked if the medical malpractice errors caused were by a small number of doctors and why the medical community did not police itself police. Dr. Nunnelley stated that it is a small number of doctors that cause the problems and that the Kentucky Board of Medical Licensure is in the top ten states monitoring physicians. He stated when there is a problem they do take action.
Representative Joe Fischer asked if the proposed legislative package included non-economic damage and if so, how do they propose getting around Section 54 of the Kentucky Constitution. Would it take a constitutional amendment? Dr. Nunnelley stated that a constitutional amendment would be necessary.
Senator Marshall Long stated that the price for any kind of insurance is a problem. He stated that he was surprised that Kentucky was in the top ten states in monitoring physicians. Dr. Nunnelley stated that the Medical Licensure Board will give physicians another chance if a problem is resolved. He stated that the board revokes several licenses to practice a year. He stated that they give physicians due process.
Senator Dan Seum asked how many insurance companies in the state sell malpractice insurance. Dr. Nunnelley stated there are eight companies.
Joel Whitcraft, Medical Protective Insurance, stated that his company has been in business since 1899, and selling in Kentucky at least 50 years. He stated that they have maintained their position in the market when other companies offer cut rates. He stated that they have filed for a 15% rate increase in Kentucky. He stated that there are several reasons for the increase, such as legal environment, competitive barrier, and regulatory environment. He stated that 10% of physicians have a claim in a policy period. He stated that he agrees with the Kentucky Medical Association and the Kentucky Hospital Association that the market needs stability and competition.
Representative Ron Crimm asked if the rates are based on graphic regions. Mr. Whitcraft stated that it is based on individual risk.
Representative Bob Damron asked if frivolous cases would cause the assignment of a higher rating. Mr. Whitcraft stated that it would be based on loss experience. Representative Damron asked if Medical Protective sold policies in California and Florida. Mr. Whitcraft stated that they do sell in both states.
Senator Julie Denton asked what percentage of cases are settled out of court. Mr. Whitcraft stated that approximately 60-70% are settled and do not go to court.
Chuck Adams, President, Kentucky Academy of Trial Attorneys, addressed the committee regarding increasing premiums for medical malpractice insurance. He stated that there are several reasons for the increase including the following: the market is down, the repeal of the statute requiring insurance companies to seek approval of rate increases or decreases of over 25%, the lawsuit where PIE-KMIC sued PIE, both medical malpractice carriers, for undercutting premiums to gain market share and PIE went bankrupt, and doctors sold their mutual company. Mr. Adams stated that caps do not work because they do not reduce insurance premiums. States with caps have equal or higher insurance premiums than states without caps. Spikes in premiums coincide with downturns in the market and not medical malpractice claim payouts. Protecting insurance company profits will not help the doctors. He stated that caps only apply to the catastrophically injured and end up penalizing children, the elderly, and stay at home mothers. He stated that there are several solutions, including a reinsurance fund, rate bands, sunshine laws, having a mutual company that is not subject to market swings, and good doctor discounts.
Representative Damron asked if the Tort system has any responsibility regarding this problem. Mr. Adams stated that he hasn’t seen evidence of that in Kentucky. Representative Damron stated that maybe there should be a Constitutional Amendment limiting damages. Mr. Adams stated that in some cases that would be unfair.
Dr. Hanson stated that the committee had heard from all the speakers that there is a crisis regarding medical malpractice insurance and he feels everyone should be open to looking for a resolution.
With no further business, the meeting adjourned.