Physician Insurer's on the Mend: With Improved Communication, Extensive Changes, PLICO Builds Durable Foundation
Francis-Smith, Janice, THE JOURNAL RECORD
Up until last year, Carl T. Hook worked full time as an ear, nose and throat doctor. Now, he serves as the eyes, ears and mouthpiece for Physicians Liability Insurance Co.'s board of directors - and often as a shoulder for physicians to cry on.
Now I get to answer the phone and talk to doctors when they have an opinion, when they have something to say, said Hook, president and chief executive officer of PLICO, the insurance company owned by the Oklahoma State Medical Association. Sometimes it's support, and keep on swinging. Sometimes it's criticism. I get both of those.
But one of my big goals is to improve the communication this company has had in the past with our doctors, so that they are informed and understand our insurance proceedings better, said Hook. The learning curve has been steep for both Hook and the physicians insured by the company as PLICO has gone through extensive changes over the last few years.
One thing he wants physicians to understand is that things are definitely looking up for the company, and that PLICO will be there for physicians when they need help. A few years ago, things didn't look nearly so good for the state's largest physician insurer.
The large financial issue came about when the (Oklahoma State) Insurance Department and the actuaries reviewed the very steep curve of how large of verdicts were occurring in medical malpractice cases, said Hook. And that was not unique to Oklahoma - that was across the country. In fact, most of these things happened in other areas.
The verdicts here in Oklahoma did triple, almost quadruple, between '99 and 2003, said Hook. Frequency was going up slightly, steadily, and had done that for several years. But the severity jumped up tremendously.
The new system
Because PLICO has operated on a not-for-profit basis, as an entity created by physicians for physicians, the Insurance Department did not place the same requirements on the company as it has on other private insurance companies.
Since PLICO began in 1980, the company had not been required to build up enough reserves to pay all the claims on its books in the event the company went under, as other insurers are required to do. But in 2003, the Insurance Department deemed PLICO would need to hold about $250 million in reserves. At that time, the company had just over $100 million in the bank, and since the company was managed by third-party administrator CL Frates and Co., the company owned virtually no assets.
In 2004, the company was placed under the formal supervision of the Insurance Department. Board members met with consultants and Insurance Department officials for months, trying to devise a way to turn the company's finances around. They came up with a multifaceted plan.
PLICO raised premiums by 40 percent in 2004, and then another 65 percent in 2005. Previously, premiums were so low that even with increases, PLICO is able to offer insurance at a lower cost than is available in 38 other states, said Hook.
They asked the physicians who obtain their insurance from PLICO to commit to the company, not just for one year, but for 30 months. The 30-month contracts could be shown on the books as company assets, and in return, PLICO guaranteed physicians that their premiums would not be raised again for the duration of the 30-month contract.
PLICO also changed the type of insurance they offered, from occurrence to claims based.
As long as you were insured at the time of an incident, then (the coverage is) there forever, and so something I did 10 years ago, if the event occurred at the time I was insured - I could be retired, done, not buying insurance anymore, not a practicing physician - and this company was still liable to pay for that, under the old system, said Hook. Now, claims made means that you have to be paying a premium for insurance at the time that the claim is presented to the company. …