IDOI proposes rule impacting the Patient’s Compensation Fund and risk retention groups

The Indiana Department of Insurance (IDOI) has proposed amendments to regulations that govern the administration of the Indiana Patient's Compensation Fund (PCF). While the rule proposes new requirements, it does not propose radical changes in the relationship between the PCF and physicians who obtain insurance through traditional commercial carriers.

The IDOI proposed rule in the Oct. 25 Indiana Register includes language involving:

• Requirements for proof of financial responsibility
• Surcharge payments and amounts
• Certificates of insurance
• Types of insurance coverage
• Settlement of claims
• Communication with the Patient's Compensation Fund (PCF)

One component to the rule, LSA Doc. #06-32, addresses insurance policies used as proof of financial responsibility for qualifying as a provider under the PCF. Recently some physicians and other providers chose to obtain insurance from risk retention groups (RRGs), due to the lack of available coverage in the commercial market.

Typically, an RRG is an owner-controlled insurance entity that allows members engaged in similar business activities to write liability insurance for all – or any portion of – the exposures of group members, with some limitations .

To ensure the financial soundness of RRGs, the IDOI proposes to make RRGs comply with one of several security arrangements to prove their healthy financial condition.

The proposed rule would require an RRG to submit documentation to the IDOI supporting the fact that the RRG can meet one of the following requirements.

The RRG must be:

• Fronted by an insurance company authorized or approved to write medical malpractice insurance under the laws of Indiana
• Reinsured by an insurance company authorized or approved to reinsure risks under the laws of Indiana
• Secured by an irrevocable trust established for the purpose of paying medical malpractice claims incurred by its policyholders in a form and under terms approved by the insurance commissioner
• Funded by an irrevocable letter of credit or other arrangement approved in writing by the insurance commissioner
• Funded by any other security arrangement approved in writing by the insurance commissioner

The IDOI proposed rule also includes language regarding:

• A health care provider’s policy being rescinded by an insurer
• Rights and obligations of both health care provider and the PCF in cases where an insurer becomes insolvent
• Language regarding hospital establishment of financial responsibility
• Requirements for submission of actuarial opinions by health care providers who establish financial responsibility by means other than insurance
• Changes to nursing home surcharges paid into the PCF

A public hearing on this proposed rule will take place at the IDOI Nov. 21 at 10a.m.

Read the full version of the proposed rule>>

Please submit any comments or questions to Michael Rinebold, ISMA Director of Government Relations, by e-mail or call 317-261-2060.