New medical malpractice insurance company enters Florida market

The state Office of Insurance Regulation has given approval to a new company, Florida Healthcare Providers Insurance Exchange, to start soliciting physicians to join the exchange, the next step in a process to become a medical malpractice insurance provider in the state.

The aim is to start issuing policies to physicians that take effect Jan. 1.

"Our expectation is to have at least 250 Florida physicians join the exchange over the next few weeks," said Christopher Prestera, president and CEO of the new company.

The insurance exchange will be operated by American Healthcare Providers Insurance Co., an affiliate of Duane Morris, LLP, an international law firm with locations throughout the United States and London. The insurance exchange will be based in Miami; Duane Morris, likewise, has offices in Miami and Palm Beach.

The new insurance option for physicians will be a "reciprocal" system whereby physicians share risk. Besides paying premiums, each must make a one-time capital investment to create a surplus fund and to become subscribers. The investment will differ among physicians, largely by the risk of their specialties, where the high-end amount could be $70,000 to a low of $6,500, said Mitchell Goldman, a Duane Morris partner.

In addition, physicians must agree to be upfront about past claims for initial underwriting and comply with risk management education, if necessary, and with office practice audits.

At the same time, physicians shouldn't expect to have lower premiums with the exchange than they do now with current policies, he said.

"The goal for us is not to lower premiums; our goal is to stabilize premiums," he said, referring to the first couple of years of operation. "Doctors are not unreasonable. It's just that their increases were unreasonable."

This past summer, only five insurance companies were still writing medical malpractice coverage to physicians, an alarming decline from 20 insurers two years ago.

The companies blamed huge lawsuit payouts for their double-digit premium increases or why they stopped underwriting in Florida. A contentious debate for the state Legislature this past spring was reining in premiums to halt the exodus of physicians to other states.

After three special sessions, legislators passed a bill that caps non-economic damages, or pain and suffering, to $500,000. Physicians say the cap won't succeed in lowering premiums.

In Collier County, 18 physicians have left or retired in the past 1½ years because of escalating premiums or because they received nonrenewal notices.

How much interest there is among local physicians in the new insurance option is uncertain. Solicitation was not done while initial state approval was being sought, Goldman, the company representative, said. Initial paperwork was filed in August.

But medical malpractice insurance brokers from Naples did attend a conference Thursday in Fort Lauderdale, where representatives from the insurance exchange unveiled the new insurance, he said.

Margaret Williams, executive director of the Collier County Medical Society, said she hasn't heard local doctors talk about it. One issue is the NCH Healthcare System requires physicians on staff to be covered by an insurance company, while the insurance exchange system sound like a self-insurance approach, she said.

NCH officials on Thursday did not have enough information about it to comment, said Debbie Curry.

The insurance exchange is not self-insurance, even though each physician will have to pay a one-time investment, said David Fridling, spokesman for Duane Morris in Philadelphia.

"What (physicians) are doing is insuring each other. It's the same concept as a mutual insurance company," Fridling said. "They have no voting rights."

From the onset, the insurance exchange will have an underwriting approach that's different from today's practice, Goldman said. The exchange will look at frequency of claims, but underwriters will talk to physicians about specifics of each case and their role for a clearer assessment of risk, he said. Currently, underwriters don't ask anything of physicians, he said.