Competitive Market Determination regarding Medical Malpractice for Physicians-Surgeons and Hospitals

STATE of NEW HAMPSHIRE INSURANCE DEPARTMENT ORDER Competitive Market Determination Regarding Medical Malpractice Insurance for Physicians, Surgeons and Hospitals Docket No.: Ins 05-025-AP Introduction I. Title XXXVH. Chapter RSA 4 l 2 contains the provisions regulating forms and rates for property and casualty insurance. 2. RSA 412: 13 states that a competitive market is presumed to exist unless the commissioner, after conducting a hearing, detennines that a reasonable degree ofcompetition does not exist in the market and issues a rnling to that effect that is valid for one year from date ofissue. 3. The provisions ofRSA 412:14 delineate the relevant infonnation, analytical systems and other sources the commissioner may consider when making this determination. 4. RSA 400-A: 17 provides the commissioner with the anthority to hold hearings for any purpose within the scope ufthis title (XXXVII) as he may deem advisable or if required by any provision ofthis title (XXXVII). 5. A June 22, 2005 Order of Public Hearing scheduling a hearing on the matter for July 18. 2005 was mailed to the fifty-three (53) licensed writers of medical malpractice insurnncc in New Hompshirc and known interested parties; and a legal notice was published in fifteen ( 15) state newspapers on July 6th and July 13th. Findings l. Testimony, presented at the hearing by the Department's Property and Casualty Actuary, focused on the following considerations enumerated in RSA 412:14 II: a. TI1e extent to which the largest insurer groups control the insurance marketplace. b. Whether the tntal number ofcompanies writing the form of insurance in this state is sufficient to provide multiple options to the pnblic. c. The c::xtent to which insurer entries and exits, considered over several years, suggest the presence or lack ofentry or exit harriers or both. d. The degree to which the insurance products offered to consumers are homogeneous in nature and thns comparable. e. ll1e availability ofcoverage in all geographic areas. f. The treud in price levels for each type of insurance. g. The profitability ofeach form of insurance over a period ofseveral years. h. The level of knowledge of market participants and the extent to which comparative pricing infom1ation has been made readily available to consumers. i. The ex.teut to which the market for each type of insurance is growing. 2. Testimony and documentary submissions ofthe Department's Property and Casualty Actuary suppol1 the following findiugs: a. For physicians and snrgeons seeking medical malpractice insurance and. to a lesser extent fut hu:;pi1.als, there exists a highly concentraied market, as measured by share oftotal premium volume. For physicians and surgeons, the market share ofthe top 4 insurers. including lhe NHMMJUA as an insurer, is 95 %. For hospitals, the market share is 59% for lhe top 4 insurers. Combined, the top 4 insurers' market share is 80%. RSA 401-B:3- a, the statute governing insnrance holding companies, defines a "highly concentrated market" to be one in which the share of the 4 l::irgest insurers is 75% or more. b. TI1e Herfindahl - Hirschman Index also supports the conclusion that the market is highly concentrated The index exceeds 3.000 for physicians and surgeons. The index is above I.200 for hospita Is. The standard used by the U.S. Department of Justice in determining the impact ofmergers and acquisitions on competition is tliat an index of 1,800 or mo~ is a sign ofa highly concentrated markeL An index in the range of 1,200 to 1,800 is a sign of a moderately conccnh·ated market. c. The regulated market, excluding the NHMMJUA, has even higher concentration ratios, and 3 insurers write nearly all of the business. I.ti reviewing rate filings made by all carriers, there is a clear and significant reliance 011 one company's data, loss costs and rates. TI1erefore, a significant level of"control" exists, even though it does not appear to be intentional on the part of the company. d. The reccut round of filed rate changes reflect a continua lion of regular and large increases on the part ofthe licensed, regulated companies. e. Financial results, while in accordance with accepted accounting aod actuarial standards and principals, reflect a high degree of uncertainty, given the long tail for loss development associaled with this line ofbnsincss, coupled with the minimal amount of loss data upon wltich to base projections. The potential for excess profits or excess losses, either ofwhich is a concern, is real and justifies a higher level ofscrutiny for submitted rate filings. 3. No prepared testimony was offered at the hearing to support the position that a competitive market does exist. During the open comment period, acfditinn:il comment,; related to some of the cousiderations cited in paragraph 6 were received from interested parties representing various insurers and insurnnce company associations in support ofthe position tllat a competitive market does exist. None of the comments, however, contradicted the findings in the preceding paragraphs or altered the gem:ral significance of those fmdings. Conclusions After reviewing the material and testimony presented at the hearing along with additional written materials submitted during the open period, I find that there is substantial evidence in support ofthe conclusion that lhe medical malpractice insurance market for physicians, surgeons and hospitals is not a competitive market. Therefore, it is ORDERED, that: I. Per RSA 412:3 and RSA 412: 13, a competitive market for medical malpractice insurance cove1ing physicians, surgeons and hospitals does not exist in New Hampshire: and 2. Rate filing procedures and standards outlined in RSA 412: 15. 412: 16 and 412: 19, specific to a noncompetitive market, should be adhered to immediately; and 3. This order will expire one year from the date this order is signed.