HB 1223

Washington State House of Representatives Office of Program Research	BILL ANALYSIS

Financial Institutions & Insurance Committee

HB 1223

Brief Description: Underwriting medical malpractice coverage.

Sponsors: Representatives Schual-Berke, Cody, Lantz, Fromhold, Simpson, P. Sullivan, Morrell, Williams, Dickerson, Linville, Clibborn, Kagi and Ormsby.

Brief Summary of Bill

Defines"underwriting" as the process of selecting, rejecting, or pricing a risk.

Requires each medical malpractice insurer to file its underwriting rules and standards with the Insurance Commissioner.

Defines "adverse action" to include cancelling, denying, nonrenewing, reducing coverage, or charging more for a medical malpractice policy.

Prevents a medical malpractice insurer from taking an adverse action (deny, cancel, nonrenew or adjust premiums) against an insured if the insured has inquired about the nature or scope of the policy, notified the insurer about a potential claim, or had a claim closed with no payment. The insurers may only take the adverse action if there are other substantive underwriting factors.

Hearing Date: 2/17/05

Staff: Jon Hedegard (786-7127).

Background:

The Office Insurance Commissioner (OIC) is responsible for the licensing and regulation of insurance companies doing business in this state. This includes insurers offering coverage for medical malpractice. The forms and rates of medical malpractice polices are "use and file." After issuing any policy, an insurer must file the forms and rates with the OIC within 30 days.

Current law does not require insurers, including medical malpractice insurers, to file underwriting standards.

Under current law, rates and forms are subject to public disclosure when the filing becomes effective. Actuarial formulas, statistics, and assumptions submitted is support of the filing are not subject to public disclosure.

Summary of Bill:

Underwriting Provisions.
"Underwrite" is defined as the process of selecting, rejecting, or pricing a risk, including:

evaluation, selection, and classifying a risk;
application of rates and rating plans; and
determining eligibility for coverage provisions, providing or limiting coverage amounts, or premium payment plans.

Medical malpractice insurers must file their underwriting rules, guidelines, criteria, standards, or other information used to underwrite medical malpractice coverage at least thirty days before it becomes effective. The filings of underwriting information must identify and explain:

the class, type, and extent of coverage provided by the insurer;
any changes that have occurred to the underwriting standards; and
how underwriting changes are expected to affect future losses.

The information is subject to public disclosure upon receipt by the Commissioner.

An insurer is excluded from the rating provision requirements if the insurer is ordered into rehabilitation under chapter 48.31 or 48.99 RCW.

Adverse Action Provisions.
As defined, "Adverse action" includes:

cancellation, denial or nonrenewal of coverage;
charging higher rates by using a rating rule, assigning the insured to a rating tier that does not offer the lowest rates, or placing the insured with a company that does not offer the lowest rates; and
reducing or making unfavorable changes in the terms of amount of coverage.

When an insurer takes adverse action against an insured, the insurer may consider the following factors only in combination with other substantive underwriting factors:

an insured has inquired about the nature or scope of coverage under a medical malpractice insurance policy;
an insured has notified the insurer, pursuant to the provisions of the insurance contract, about a potential claim, which did not ultimately result in the filing of a claim; or
a claim was closed without payment.

Appropriation: None.

Fiscal Note: Not requested.

Effective Date: The bill takes effect 90 days after adjournment of session in which bill is passed.