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The Oklahoma House passed a measure giving the state’s major medical malpractice insurer two more years to build up its reserves before state regulators intervene. HB 1566, by State Rep. Dan Sullivan, would exempt the Physicians Liability Insurance Company from state regulations requiring insurers to maintain sufficient reserves to pay off all potential claims.

During the 2004 legislative session, Oklahoma lawmakers voted to exempt PLICO, the state’s largest provider of medical malpractice insurance, from laws requiring insurance companies to maintain “adequate reserves” to cover all current and anticipated claims. The exemption was designed to allow PLICO time to build up its reserves through premium increases, which would be used in part to buy reinsurance policies that would cover any catastrophic claims that arose unexpectedly. At the time, PLICO did not have reinsurance coverage.

PLICO officials have said they can pay all existing claims but lack the reserves to cover all potential future claims. At the end of 2004, Physicians Liability Insurance Company increased its rates by up to 55 percent, although officials promised no additional increases would occur in 2005 and 2006.

Sullivan said the survival of PLICO, which provides medical malpractice coverage to roughly 70 percent of Oklahoma doctors, is crucial to the state’s health care system. He said recent changes at PLICO had reduced the company’s ability to complete its recapitalization plan in the time frame approved by lawmakers last year. For example, Sullivan said PLICO recently began offering a policy providing up to $500,000 in malpractice coverage. Previously, the company’s minimum policy provided $1 million in coverage and generated larger premiums than the new $500,000 policies.

Under current law, PLICO would have been required to complete its recapitalization by Jan. 1, 2006. Under the provisions of HB 1566, that deadline would be extended to Dec. 31, 2008.

Topics Legislation Oklahoma