Montemayor Addresses Texas Physicians in Open Letter

The Texas Department of Insurance recently posted a letter to Texas physicians from Insurance Commissioner José Montemayor, responding to the decision by General Electric Medical Protective to move its medical malpractice business to its risk purchasing group. GE Medical Protective is taking the action reportedly in order to raise rates for its medical liability insurance policies in the state.

Following is the text of the Montemayor’s letter:

Dear Texas Physicians:

I have learned that General Electric Medical Protective has decided to transfer its Texas medical malpractice insurance business to its risk purchasing group. Respectfully, I am disappointed in this decision and believe it is premature. If the company would have waited for four to six months and relied on the reforms of Proposition 12, they would have reached a different conclusion and not felt the need to move its policyholders to a purchasing group.

I understand that Medical Protective will offer all its current policyholders the opportunity to switch their coverage to this new group. While this may be a courtesy and convenience, the Texas Department of Insurance is reviewing every legal option available to protect Medical Protective’s policyholders and ensure they pay a fair rate. Medical Protective has been raising its medical liability insurance rates nationwide. The company filed for a 19 percent rate increase here in Texas to be effective June 1, 2004. I did not feel that this increase took into account, among other things, the full effect of the reforms enacted by Proposition 12, which was passed by Texas voters last year. While the increase Medical Protective was seeking is lower than what they are implementing in other states, I do not feel it is justified.

The Texas market is strong and getting stronger. Ten (10) new carriers have recently taken concrete steps to enter the Texas marketplace and many more have indicated an interest in doing business in Texas. Rates have stabilized and competition is returning. This action by Medical Protective in no way reflects on the viability of the medical liability market in Texas.

Sincerely,
José Montemayor, CPA
Commissioner of Insurance