II. Background Information on State Patient Compensation Funds (PCFs)

Broadly defined, a Patient Compensation Fund is a "medical malpractice insurance mechanism, created by state law, designed to increase professional liability coverage availability and/or affordability primarily by providing coverage for a specific type of injury or an excess layer of coverage."[1] PCFs were first created to ensure access to medical malpractice insurance during the "medical malpractice crisis" of 1975-1976, when it was feared that a few large judgments would lead insurers to significantly increase premiums or even refuse to underwrite coverage.[2] Accordingly, most PCFs work to limit the damages that can be assessed against participating healthcare providers by assuming liability for awards in excess of required primary insurance thresholds (generally between $100,000 and $1,000,000 per occurrence).[3] They can be either voluntary funds, which providers have the option of utilizing to obtain excess coverage, or mandatory ones, in which all providers meeting certain statutory definitions must participate.[4] PCFs generally cover physicians, hospitals, and in some cases, other healthcare providers and are funded through surcharges on these participants' primary medical malpractice insurance premiums. Different states provide varying degrees of oversight, but PCFs are usually organized as a state agency or trust fund and administered through a state's Board of Insurance or a Board of Directors.[5]

As of 2005, eleven states - Florida, Indiana, Kansas, Louisiana, Nebraska, New Mexico, New York, Pennsylvania, South Carolina, Virginia, and Wisconsin - currently operate some form of PCF.[6] Of these, Virginia and Florida have funds specifically earmarked only for compensating patients for birth-related neurological injuries.[7] As a result of the narrow scopes, the Florida and Virginia funds not relevant to the discussion of a PCF in Missouri. Also quite different is New York's fund. Established in 1986, and roughly a decade after the funds in other states, it is structured as an "excess liability pool" that provides excess coverage (above a required $1 million per occurrence in primary coverage) to physicians with hospital privileges.[8] Since 2000, the New York fund has functioned as a public subsidy program, in which the state finances private excess insurance and regulates premiums on that insurance for its physicians with monies from its General Fund.[9] Another Florida fund, the Florida Patient Compensation Fund, ceased taking on new policies as of June 3, 1983 because it had under-priced coverage and failed to remain solvent.[10] However, as of 2003, Florida still carried responsibility for claims.[11] The basic provisions of the remaining nine funds are summarized in Exhibit 1. With the exception of New York, all of these funds were established from 1975 to 1978.[12] Pennsylvania's fund is scheduled to be eliminated in 2009.

Wyoming, North Dakota, and Oregon each have statutory provisions for a fund but do not operate them, while the North Carolina legislature created a Medical Compensation Fund in 1976 but left it unfunded until its repeal in 1997.[13]

II. Background Information on State PCFs

Broadly defined, a Patient Compensation Fund is a "medical malpractice insurance mechanism, created by state law, designed to increase professional liability coverage availability and/or affordability primarily by providing coverage for a specific type of injury or an excess layer of coverage."[1] PCFs were first created to ensure access to medical malpractice insurance during the "medical malpractice crisis" of 1975-1976, when it was feared that a few large judgments would lead insurers to significantly increase premiums or even refuse to underwrite coverage.[2]Accordingly, most PCFs work to limit the damages that can be assessed against participating healthcare providers by assuming liability for awards in excess of required primary insurance thresholds (generally between $100,000 and $1,000,000 per occurrence).[3] They can be either voluntary funds, which providers have the option of utilizing to obtain excess coverage, or mandatory ones, in which all providers meeting certain statutory definitions must participate.[4]

PCFs generally cover physicians, hospitals, and in some cases, other healthcare providers and are funded through surcharges on these participants' primary medical malpractice insurance premiums. Different states provide varying degrees of oversight, but PCFs are usually organized as a state agency or trust fund and administered through a state's Board of Insurance or a Board of Directors.[5]

As of 2005, eleven states - Florida, Indiana, Kansas, Louisiana, Nebraska, New Mexico, New York, Pennsylvania, South Carolina, Virginia, and Wisconsin - currently operate some form of PCF.[6] Of these, Virginia and Florida have funds specifically earmarked only for compensating patients for birth-related neurological injuries.[7] As a result of the narrow scopes, the Florida and Virginia funds not relevant to the discussion of a PCF in Missouri. Also quite different is New York's fund. Established in 1986, and roughly a decade after the funds in other states, it is structured as an "excess liability pool" that provides excess coverage (above a required $1 million per occurrence in primary coverage) to physicians with hospital privileges.[8] Since 2000, the New York fund has functioned as a public subsidy program, in which the state finances private excess insurance and regulates premiums on that insurance for its physicians with monies from its General Fund.[9] Another Florida fund, the Florida Patient Compensation Fund, ceased taking on new policies as of June 3, 1983 because it had under-priced coverage and failed to remain solvent.[10] However, as of 2003, Florida still carried responsibility for claims.[11] The basic provisions of the remaining nine funds are summarized in Exhibit 1. With the exception of New York, all of these funds were established from 1975 to 1978.[12] Pennsylvania's fund is scheduled to be eliminated in 2009.

Wyoming, North Dakota, and Oregon each have statutory provisions for a fund but do not operate them, while the North Carolina legislature created a Medical Compensation Fund in 1976 but left it unfunded until its repeal in 1997.[13]

[1] Pinnacle Actuarial Resources, Inc., Preliminary Report on the Feasibility of an Ohio Patients Compensation Fund 2 (Feb. 2003), http://www.ohioinsurance.gov/Legal/REPORTS/Prelim_Patient_Compensation_Report_03-03-03.pdf.

[2] Frank A. Sloan, Public Medical Malpractice Insurance 3 (2004), available at http://www.pewtrusts.

org/our_work_report_detail.aspx?id=16914

[3] Id. at 36.

[4] Id.

[5] Frank A. Sloan et al., Public Medical Malpractice Insurance: An Analysis of State-Operate Patient Compensation Funds, DePaul L. Rev., 247, 254 (2005).

[6] Forest Dean Griffen, A Message from the Chairman, LPCF Q., Sept 2005, at 2, available at: http://www.lapcf.state.la.us/newsletter/issue1/PCF%20newsletter%209-8-2005.pdf.

[7] Sloan, supra note 2, at 49.

[8] Pinnacle Actuarial Resources, Inc., supra note 1, at 10-11.

[9] Sloan, supra note 5, at 251.

[10] Id. at 248.

[11] Id. at 249.

[12] Id.

[13]South Carolina Legislative Audit Council, Report to the General Assembly: A Review of the Medical Malpractice Patients' Compensation Fund., Jan. 2000, last viewed July 2005, http://www.state.sc.us/sclac/Reports/2000/pcf.pdf.