Physicians Insurance Responds to Washington OIC Consent Order

Washington Insurance Commissioner Mike Kreidler has fined the state’s largest medical malpractice insurer $450,000 for multiple violations of insurance laws and regulations that the company has since corrected under an agreement. Kreidler conditionally suspended $400,000 of the fine against Physicians Insurance and its affiliates, Western Professional Insurance Co. and Northwest Dentists Insurance Co.

The agreement stems from an October 2004 market conduct examination by the OIC into the company’s practices during a one-year period. That examination uncovered numerous and widespread compliance problems. Because of the scope and extent of the violations, the agency terminated the exam after the company agreed to hire consultants, make organizational changes and correct problems.

In March, 2005, as a result of that review process, Kreidler ordered the company to refund $1.3 million after it reported charging excessive premiums to 2,490 insured physicians in 2004. The refunds ranged up to $4,600. The company also paid a $90,000 fine for using unapproved rates that led to the excessive charges.

Four months later, a second refund was ordered after the company discovered that it had miscalculated premiums in 2004, incorrectly billing 2,400 providers. Refunds averaged $350 each.

Yesterday’s order concludes the company’s review and reorganizing effort. During that effort, the company spent $1.2 million to bring itself into compliance with rate and form filing requirements, and to prevent future violations.

Physicians Insurance A Mutual Co. issued a press release noting its new internal systems and controls have resulted in the company solving all outstanding compliance issues.

“We have worked hard with the Office of the Insurance Commissioner to successfully put our compliance house in order,” said Mary-Lou Misrahy, president and CEO of Physicians Insurance. “Our success in doing so has resulted in bringing to a close any and all outstanding compliance issues with the OIC.”

As part of the Consent Order agreed to by the OIC and Physicians Insurance, a fine of $50,000, arising from historical compliance issues, will be paid within 30 days, and an additional $400,000 that was a part of the overall fine, will be suspended after two years, so long as ongoing compliance improvements continue producing accurate results.

“I’m convinced that CEO Mary-Lou Misrahy and her management team have found and fixed the problems that have beset this company in the recent past,” Kreidler said. “I am now confident that Washington’s medical provider community can rely on Physicians to provide stability in the market in the years to come.”

“I am gratified that the Office of the Insurance Commissioner has acknowledged that we have effective systems in place to improve operations and promote regulatory compliance,” Misrahy said. “We have turned the corner on the identified areas of concern. We are extremely proud of our record in the marketplace and look to continue our high level of service to the physician and dental communities of Washington.”

Physicians is the largest medical malpractice insurer in Washington, covering approximately 70 percent of the state’s physicians and surgeons.

Source: Physician’s Insurance, OIC