Bright Future For MLMIC

By Jerry Hoffman
Wednesday, October 26, 2016

Medical Liability Mutual Insurance Company, in business since July 1, 1975, is in the process of becoming part of National Indemnity Company, a subsidiary of Berkshire Hathaway, a Warren Buffett enterprise. MLMIC’s Executive Committee met with Buffett and some of his associates earlier this year. Among those in attendance was Duane Cady, MD, a longtime MLMIC Executive Committee member, past president of the Onondaga County Medical Society and the Medical Society of the State of New York, and a past chair of the AMA’s Board of Trustees.

Dr. Cady, a retired general surgeon, was impressed with Buffett’s low-key manner and his stated intention that National Indemnity Company will have no role in the operations of MLMIC and would have no one from its company on MLMIC’s Board of Directors. Buffett called MLMIC a “gem” and highly praised the role of MLMIC in addressing the needs of policyholder physicians and hospitals. Edward J. Amsler, Esq., Chief Executive Officer of MLMIC, reports that the company currently insures approximately 14,000 physicians and 30 hospitals in New York state.

In July, MLMIC’s Executive Committee approved the National Indemnity Company proposal and MLMIC’s intention to become a stock insurance company. Completion of the entire process is hoped to occur by the end of 2017. A lengthy outline of the proposal, including a comprehensive a section with 13 questions and answers, was released after the Executive Committee action. Future approvals must come from policyholders and the state’s Department of Financial Services.

With the change, MLMIC “will become a member of a group that includes other insurers that specialize in liability insurance coverage to healthcare providers …. Such affiliation will enhance MLMIC financial strength and will provide MLMIC with greater resources to back its obligations to policyholders and to underwrite additional business. Such affiliation will provide MLMIC with increased flexibility to support the growth of product lines.”

Dr. Robert Menotti, MLMIC President of the Board of Directors, points out that the Claims Review Committee will remain in place. He is Chair of the committee, which also includes three other representatives of MLMIC and three appointees by MSSNY.

Policyholders who were insured by MLMIC for the last three policy years, July 1, 2013–2016, will receive a projected return equal to the total premiums paid by the policyholder for the entire three-year period. If the premiums were paid by an employer, that amount will go to the employer, not the physician.

MLMIC was established following the malpractice crisis in 1975 when commercials insurance carriers across the country fled the medical liability marketplace. At a National Conference on Medical Malpractice that year, Warren Cooper, Vice President and actuary for Chubb & Son Inc. said, “the main reasons for the availability crunch was inability as insurance people to project the price that we really feel should be charged for this line of business, for in our economic scheme, the business really operates effectively only if they can accurately project what they should charge.” Cooper was critical of the physicians’ lack of knowledge about insurance. Cooper commented that “physicians forget what insurance is — a pool of risk. If we could predict their losses, we would advise them to set their own money.”

Booz Allen Consulting Actuaries of California said that “the current malpractice crisis has been caused in part by poor pricing by the insurance industry.”

Some members of the New York State Senate, including the Senate Minority Leader Manfred Ohrenstein, blamed doctors for the crisis. Fellow Democrat Sen. Fred Isabella of Schenectady, a dentist, was offended by Ohrenstein’s comments. Isabella retorted that “I take exception, and I disagree, and I am hurt because of my minority leader tearing down the medical profession. I come from a medically oriented family, one nurse, three dentists and one physician.” On May 19, 1975, a final compromise bill passed the State Senate (56–4) and the State Assembly (120–27).

On May 30, 1975, the State Insurance Department approved MLMIC’s first premiums, which took effect July 1, 1975. The rates called for a 20 percent increase, far less than the Argonaut’s original request for a 196.8 percent increase, which led to the availability crisis and ultimately the formation of MLMIC. The State Medical Society loaned MLMIC $100,000 to help the company get started. Physician policyholders had to pay subordinated loans of $1,750 each to become MLMIC insureds. Those loans were later repaid with interest.

Gerald N. “Jerry” Hoffman was chief executive officer of the Onondaga County Medical Society from 1981 until his retirement Jan. 31, 2014, and is co-author of two books, Medical Malpractice Insurance: A Legislator’s View, and The History of Local Medical Care, 1806-2006.