New York state's largest medical professional liability writer said tort reform is gaining traction in the Empire State, but much more is needed to improve the unusual market there.

The state recently approved a measure to create a liability fund to cover the future medical expenses of children who are neurologically injured at birth, said Ed Amsler, vice president of the Medical Liability Mutual Insurance Co., which is the largest MPL insurer in the United States even though it only writes in New York.

"It's an excellent piece of tort reform," Amsler said told BestWire at the Physician Insurers Association of America's 2011 Medical Liability Conference in Scottsdale, Ariz

The legislation should help hospitals and institutions who carry $4 million to $5 million in coverage for liability.

But because the fund does not cover costs including past medical expenses, pain and suffering, lost future income and attorney fees associated with future medical costs, it isn't likely to be of much help to physicians, he said. Physicians are required to carry $1.3 million in liability in New York state to gain access to a state-paid $1 million excess layer. That $2.3 million of total MPL coverage is likely to be burned through even with the pool covering future medical costs, Amsler said.

In another positive sign, the state considered, but ultimately failed to pass a measure that would have capped pain-and-suffering costs at $250,000. Still, Amsler said, it's significant that Gov. Andrew Cuomo supported the bill.

"The benefit is it started a public discussion on tort reform," Amsler said. Lawmakers also agreed to extend two unusual provisions in New York law that exempt MPL writers from having to meet risk-based capital requirements and prevent state regulators from liquidating insolvent MPL insurers. Those measures have been extended until 2014.

The state still needs to address the situation with its residual market pool, which currently has an estimated $470 million shortfall in capital needed to pay future claims, Amsler said. The state's mandatory insurer of last resort, the Medical Malpractice Insurance Pool, covers doctors who can't find coverage elsewhere. The burden on paying the claims for MMIP rests on the shoulders of the state's MPL writers (BestWire, Oct. 18, 2010).

MLMIC, which has about a 50% market share in the state, is responsible for paying 50% of MMIP's claims, even if it means covering doctors that MLMIC refused to write in the first place, Amsler said. MLMIC also gets stuck paying its share of the pool's $1 million in state-funded excess layer of coverage, a coverage that MLMIC does not write for its own insureds.

The issue with the pool is inadequate rates, Amsler said.

Unlike other states, where regulators may sign off on a company's proposed rates either before or after they are implemented, New York state is unusual in that the insurance superintendent creates the MPL rates for the entire industry. The rates are not required to be actuarially sound.

"If you had adequate rates inside the pool, you wouldn't have to worry about losses," Amsler said. "The problem is the pool doesn't have the capital. If it got adequate rates for the risks, you wouldn't have a burden on members."

The rates for physicians in the pool are adequate, however the rates for the excess layer are "questionably adequate," Amsler said.

The good news is despite the unusual regulatory environment in New York, MLMIC is offering a 7.5% discount for its members who have made it through five years without a claim. It's the first time the company's been able to do that, Amsler said, and the discount applies to about 54% of its doctors, including about 25% of its obstetricians.

The top five U.S. medical professional liability underwriters by 2010 direct premiums written were MLMIC Group, Berkshire Hathaway Insurance Group, Doctors Company Insurance Group, ProAssurance Group and CNA Insurance Cos., according to an A.M. Best special report on the medical professional liability market.

To see the video with Amsler, go to http://www.ambest.com/media/media.asp?RC=186546.

(By Meg Green, senior associate editor, BestWeek: Meg.Green@ambest.com)