Interim Joint Committee on Banking and Insurance


Minutes of the<MeetNo1> 1st Meeting

of the 2003 Session Break


<MeetMDY1> January 28, 2003


The<MeetNo2> 1st meeting of the Interim Joint Committee on Banking and Insurance was held on<Day> Tuesday,<MeetMDY2> January 28, 2003, at<MeetTime> 10:00 AM, in<Room> Room 149 of the Capitol Annex. Senator Tom Buford, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Tom Buford, Co-Chair; Representative James Bruce, Co-Chair; Senators Lindy Casebier, Julie Denton, Ernie Harris, Daniel Mongiardo, R.J. Palmer II, Albert Robinson, Larry Saunders; Representatives John Adams, Sheldon Baugh, James Comer, Ron Crimm, Ted "Teddy" Edmonds, Joseph Fischer, Danny Ford, James Gooch, Dennis Horlander, Don Pasley, Frank Rasche, Steve Riggs, Arnold Simpson, Brandon Smith, Roger Thomas, Tommy Thompson, Ken Upchurch, and Susan Westrom.


Guests:  Janie Miller, Commissioner, Department of Insurance and Jefferey Skelton, Choicepoint, Inc..


LRC Staff:  Greg Freedman, Emily Bottoms, Rhonda Franklin, and Jamie Griffin.


Commissioner Janie Miller addressed the committee regarding medical malpractice insurance in Kentucky.  She presented the committee with a report, “Performance Trends in Medical Malpractice Insurance, A National and State-Specific Review”, prepared by the Department of Insurance.  Commissioner Miller reviewed the report with the committee and addressed questions relating to the report.


Commissioner Janie Miller presented the committee with the Department of Insurance’s recommendations regarding medical malpractice insurance.  She stated that the medical malpractice insurance market in Kentucky continues to harden.  While an  adequate number of carriers are offering coverage, the cost has increased and finding coverage is requiring additional effort on the part of providers.  In addition, underwriting has become stricter with companies looking much more closely at the risk being assumed.  Providers, particularly those in high-risk specialties such as obstetrics/gynecology, neurosurgery, and emergency medicine, as well as those with past claims history, are reporting large premium increases.  She stated that following months of study, on January 7, 2003, the Department of Insurance announced an immediate course of action and a three-part recommendation for consideration.  She stated that immediate action is being taken.  Effective January 15, 2003, all companies writing medical malpractice coverage in Kentucky are required to file their rates with the Department.  She stated that this is known as “designating” the line.  This will not add an undue burden of regulatory constraints to companies and will not interfere with competition or participation in the marketplace.  She stated that rates for designated commercial lines are required to be filed within 15 days after the first use.  However, if there is a change of more than 25 percent from the then-existing rates for any classification of risks in any rating territory within a 12 month period, the rates must be filed for prior approval before being used.  She stated that in order to receive approval, a carrier will need to submit actuarial justification of rate need.  If this justification is provided, approval will be granted.  She stated that this move will allow for closer monitoring of the market by the Department to assure that rates are justified by insurers’ costs, claims, and other expenses.  In addition, improvements will be made to reporting mechanisms to produce more accurate, useable data regarding medical malpractice claims and costs.


Commissioner Miller made the following recommendations:


1.                  Create a mandatory pre-litigation medical screening panel for each claimant.


2.                  Establish consumer safeguards on fees an attorney may receive from a medical malpractice award.


3.                  Develop a continuing education effort to assist providers in reducing the incidence of malpractice.


Commissioner Miller also included in this report the states that currently have medical review panels and the states that limit attorney fees.


Senator Tom Buford asked if the recommendations made by the commissioner would require a Constitutional Amendment to be passed.  Commissioner Miller stated that the Department believes the way it is structured it should not have to have a Constitutional Amendment.  Senator Buford stated that the Department may need to get an Attorney General’s opinion.


Representative Sheldon Baugh asked, under the department’s proposal litigation would be pursued in the area where the injury occurred or would it be in Franklin Circuit Court.  Commissioner Miller stated that it would be in the area where the injury occurred.


Representative Roger Thomas asked who the Medical Protective Company is writing coverage for the most.  Commissioner Miller stated that it is mostly physicians.


Senator Larry Saunders asked if the Department has the data on the amounts that have been paid out on medical malpractice claims.  Commissioner Miller stated that they do not have individual amounts, only annual statements filed by the companies.


Representative Susan Westrom asked if the Department has information on amounts awarded to plaintiffs in jury trials versus settled cases.  Commissioner Miller stated that the Department has very little information regarding that because it is not required.


Representative Ron Crimm introduced Jeffrey Skelton, Vice President, ChoicePoint.  Mr. Skelton gave a brief explanation of credit scoring.  He stated that his company is based in Georgia  and provides underwriting tools to insurance companies.  He stated that credit scoring is basically the ranking of consumers likelihood to file claims in a 12 month period.  He stated that they do not measure location, net worth, salary, nationality, race, religon, age, gender, or income in calculating a person’s credit score.


With no further business, the meeting adjourned at 11:50 a.m.