New Mexico

IV. State Case Studies

New Mexico

New Mexico’s PCF was created in 1978 as a part of the state’s Medical Malpractice Act. It operates on a voluntary basis and provides participating physicians with coverage for judgments in excess of $200,000 occurrence/$600,000 aggregate. Originally unlimited, coverage for non-economic damages was capped at $600,000 in 1992.[1] The Act prohibits the PCF’s monies from being transferred to the state’s general fund or being used for other purposes, and according to Alan Seeley, Chief Property Casualty Actuary for the New Mexico Insurance Division, there have been no attempts to circumvent this provision.[2] The statute requires an independent actuarial study of the PCF every two years; the study determines the fund’s expected liability and recommends a rate of assessment to the state. However, the state has historically chosen to operate the fund not on a loss reserve basis as determined by the actuaries, but instead as a “pay-as-you-go” system.[3] This often has resulted in a fund deficit, which, according to Seeley, has decreased over the past decade from $30 million in the early 1990s to just $5 million at the end of fiscal year 2002, the last year for which actuarial data is available.

New Mexico’s PCF operates on a voluntary basis in a state with relatively few private insurers. “In essence, almost all of our doctors are in the fund,” said Seeley. Nearly all of these doctors obtain their underlying primary insurance from one of two private carriers (one of which is no longer writing new policies).[4] Also, as an incentive for participation in its PCF, New Mexico has instituted recovery caps for only those physicians with PCF coverage. The combination of these factors has helped prevent problems with doctors leaving the program in the case of increasing premiums.[5] Additionally, New Mexico last year instituted an experience rating system, which assesses physicians for PCF premiums individually, based on the number of claims filed against them over the last five years.[6]