State Blocks Insurer's Plan to Return $68 Million

Less Money Should Go to Doctors and More to Maryland, Commissioner Says

Less than three years after Maryland began subsidizing medical malpractice insurance premiums for doctors, the state's leading malpractice insurer is reducing rates and offering doctors a rebate.

This week, the Maryland Insurance Administration blocked a plan to distribute the $68 million, and a hearing is scheduled for next month to determine how much should go to doctors and how much to the state.

Insurance Commissioner Ralph S. Tyler said in a statement that a "portion of the money" that Medical Mutual Liability Insurance Society of Maryland wants to hand over to doctors is "properly owed to the state."

"I need a greater opportunity to review and digest this proposal," Tyler said in a statement. "With this amount of money at stake, I want to be sure that it is handled appropriately."

Tyler was not available for further comment yesterday. His spokesman said that Medical Mutual is planning to give some of the money to the state but that Tyler wants to have more say in determining the state's share.

John Franklin, a spokesman for Medical Mutual, said he could not comment on Tyler's order.

Martin Wasserman, executive director MedChi, the professional society for Maryland doctors, said yesterday that doctors are puzzled.

"We're trying to sort out the facts," Wasserman said, adding that he had hoped the issue would be resolved without the hearing set for Oct. 5.

"This has nothing to do with state coffers . . . and the legislature shouldn't be involved in this," he said.

Less than three years ago, then-Gov. Robert L. Ehrlich Jr. (R) called a special session of the legislature to address skyrocketing malpractice insurance rates. Insurers and doctors lobbied lawmakers to reduce a planned increase of 33 percent to 5 percent.

The legislative package that emerged included a tax on HMO premiums to help subsidize the program.

The $68 million surplus appears to support those who suggested that the problem was short-term.

"It was not the long-term problem that Bob Ehrlich and his cohorts claimed," Sen. Brian E. Frosh (D-Montgomery County) said yesterday. Frosh said the problem now is deciding what to do with the money.

"There's a balance we want to strike," he said. "It's important that we don't chase doctors out of the state by having prohibitive malpractice insurance rates. . . . Should the money come back to the taxpayers? He's absolutely right to take a look at it."

In his order, Tyler says Medical Mutual did not provide the administration with ample opportunity to review the method used to return the money, which is being paid as a dividend to policyholders. The insurer failed to notify the state in advance, as required by law, of its decision to pay a dividend, the order says.

The order also says state law requires that money from the subsidy "not used to provide a rate reduction, credit or refund to a health care provider" be returned to the state.