NEW YORK STATE
INSURANCE DEPARTMENT

PROPOSED
SECOND AMENDMENT TO REGULATION 124
(11 NYCRR 152)

PHYSICIANS AND SURGEONS PROFESSIONAL
INSURANCE MERIT RATING PLAN

          I, Neil D. Levin, Superintendent of Insurance of the State of New York, pursuant to the authority granted by Sections 201, 301 and 2343 (d) and (e) of the Insurance Law, hereby promulgate the Second Amendment to Part 152 (Regulation 124) of Title 11 of the Official Compilation of the Codes, Rules and Regulations of the State of New York, to take effect upon publication in the State Register.

(NEW MATTER IS UNDERSCORED; MATTER IN BRACKETS IS DELETED)

Section 152.1 (b) is amended to read as follows:

         (b) [Some] At the time this regulation was first promulgated some insurers [currently have] had a formal merit rating plan, while others [impose] imposed surcharges and credits on an ad hoc judgmental basis. [This regulation establishes a uniform plan for use by all insurers, which supersedes all existing plans. The department believes it is in the best interests of insurers, physicians and the public to maintain stability in the rating system by requiring all insured physicians to be experience-rated under the same set of criteria.] The department believed it was in the best interests of insurers, physicians, and the public to maintain stability in the rating system by requiring all insured physicians to be experience-rated under the same set of criteria. A physician's merit rating plan was established by Section 152.3 of this Part and all insurers were required to utilize that plan, unless the superintendent approved the use of an alternative plan pursuant to Section 152.4 of this Part. The plan, which applies to all claims-made and occurrence policies, is intended to be revenue-neutral: i.e., any additional funds generated by surcharges must be offset by a rate discount factor that is applied to the base rates; over the long term and for all insurers within the entire system. After reviewing the use of the plan established by the Insurance Department and approved alternative merit rating plans, the superintendent has determined that the use of alternative merit rating plans may be expanded and that insurers need not be restricted to the use of the plan established in this Part.

The title of Section 152.3 is amended as follows:

          152.3 [Procedures.] Insurance Department Merit Rating Plan Model.

Section 152.3 (c) is amended to read as follows:

          (c) Assignment of points for chargeable losses. For each chargeable loss, one point shall be assigned. These "points" generate surcharges according to the following schedule of percentages, which is based on the specialty classifications currently filed by the Medical Malpractice Insurance Association. In this schedule, downstate refers to the following New York State counties: Nassau, Suffolk, Bronx, Kings, Queens, Richmond, Rockland, Sullivan, New York, Orange and Westchester; upstate refers to all other New York State counties. (Note: These factors will be adjusted periodically as more experience data becomes available):

Surcharge points 1 2 3 4 5 6

7 or more

1-7 (Downstate) 0 0 10% 35% 80% 130%

200%

8-[14] 16 (Downstate) 0 10% 35% 70% 110% 150%

200%

1-7 (Upstate) 0 10% 35% 70% 110% 150%

200%

8-[14] 16 (Upstate) 5% 15% 45% 85% 120% 160%

200%

Section 152.3 (d) is amended to read as follows:

          (d) Credits. Insurers who insure physicians in the first year of practice, or physicians in part-time practice (e.g., semi-retired or in full-time teaching) must file an appropriate rate credit. Other credits may be filed with the superintendent for approval pursuant to Section 2305(b) of the Insurance Law. Such credits must be adequately supported and comply with Section 2303 of the Insurance Law. Any surcharge or credit generated by other provisions of this regulation will apply to the reduced premium. [No credits other than those specified in this regulation will be permitted.]

Section 152.4 is amended to read as follows:

          152.4 Alternative plans. [Subject to the superintendent's approval, a] A plan may be submitted for the superintendent's approval which varies in one or more aspects from the rules established in this Part [if the unique circumstances of the insurer warrant exceptional treatment, and if credible data supports the proposal. The burden of demonstrating entitlement to a variance shall rest with the insurer. This regulation is not intended to prescribe an insurer from adopting a retrospective rating plan which is approvable by the superintendent upon a determination that the plan is not inconsistent with other provisions of this regulation and is based upon demonstrable actuarial evidence]. Any merit rating plan must consider the criteria established in Section 2343 (d) of the Insurance Law. The plan must be intended to be revenue-neutral and must:

          (a) reflect an individual physician's or surgeon's experience with respect to incidents or occurrences of alleged medical malpractice;

          (b) be reasonable and not unfairly discriminatory, inequitable, violative of public policy or otherwise contrary to the best interests of the people of this state;

          (c) consider the following hazards;

                    (1) hazards of the insured;

                    (2) geographical area;

                    (3) specialties of practice; and

                    (4) loss and expense experience, trends in frequency,

                        and severity of losses; and

          (d) clearly state rules for recognizing the experience of individual risks.

 Section 152.5 is amended to read as follows:

          152.5 [Application] Amount and application of risk management premium credits.

                       (a) Insurers may file, for approval by the superintendent, a premium credit of up to five percent for insured physicians who successfully complete a qualified risk management program.

                       (b)(1) The premium credit shall be effective with the next anniversary date of the policy following completion of the basic course of the risk management program[, for a period of up to three policy years]. However, if an insured completes the risk management course within 60 days after the policy anniversary date, the credit may be applied retroactively to that anniversary date.

                       (2) Where a policy is paid for on other than an annual basis insurers may provide for the risk management premium credit to become effective on the premium due date next following completion of the basic course.

                       (3) Premium credits after the [third policy] second year following the insured's first receiving the premium credit may only be applied if the insured [again completes a qualified risk management program] successfully completes the follow-up course as provided in Section 152.6(e) of this Part.

Section 152.6 (b) is amended to read as follows:

                     (b) The program must contain at least two components:

                                 (1) a basic risk management course; and

                                 (2) a follow-up course to be taken [prior to the beginning of the third policy year during which the credit is to be granted] every two years after first receiving the risk management premium credit.

Section 152.6 (e) is amended to read as follows:

                         (e) In order to [continue the credit for the third policy year,] remain eligible for the risk management premium credit the insured must complete a follow-up course, which must:

                                     (1) consist of a lecture (or other classroom setting) of at least three hours in length exclusive of breaks;

                                     (2) be designed to reinforce the concepts covered in the basic course and to bring to the insured's attention any relevant developments since completion of the basic course; [ and]

                                     (3) unless provided in the basic course, contain material specific to the insured's medical specialty; and

                                     (4) require the insured, subsequent to the lecture component of the course, to complete a project (such as the critical review of case studies), that is designed to demonstrate and reinforce the concepts taught in the program, which must be returned to the insurer (or the entity conducting the risk management program) within 60 days after completion of each follow-up course.

Section 152.7 (a) is amended to read as follows:

                         152.7 Implementation. (a) [All insurers shall adopt and submit a merit rating plan for approval by the superintendent, except as hereafter provided, by August 15, 1986, to apply to policies issued or renewed on and after July 1, 1986. The appeals procedure and notice required by this Part shall be adopted and submitted by August 15, 1986. Following approval of each insurer's merit rating plan, the] Insurers may continue to use merit rating plans which have been approved by the superintendent. The offsets that must be applied to the base rates in order to insure that these plans are revenue neutral, should be incorporated in all subsequent rate filings. These offsets shall be periodically reviewed by all insurers.

Subdivisions (b), (c) and (d) of Section 152.7 are relettered (c), (d) and (e) respectively and a new subdivision (b) is added to read as follows:

                          (b) An insurer wishing to modify its approved merit rating plan shall submit the modified plan to the superintendent for approval. An insurer entering the physicians and surgeons professional liability market in New York may utilize the merit rating plan model set forth in this Part or may submit an alternative merit rating plan. A submission shall include a detailed explanation of how the proposed merit rating plan complies with Section 152.4 of this Part.

Section 152.8 (b) is amended to read as follows:

                         (b) Every insurer offering a risk management premium credit shall annually, not later than March 1st, submit to the superintendent a report indicating, by territory and medical specialty:

                                      (1) total number of insureds; and

                                      (2) number of insureds receiving the premium credit.

I, Neil D. Levin, Superintendent of Insurance of the State of New York, do hereby certify that the foregoing is the Second Amendment to 11 NYCRR 152 (Regulation 124), promulgated by me on July 17, 1998, pursuant to the authority granted by Sections 201, 301 and 2342 (d) and (e) of the Insurance Law, to take effect upon publication in the State Register.

Pursuant to the provisions of the State Administrative Procedure Act, prior notice of the proposed amendment was published in the State Register on February 25, 1998. No other publication or prior notice is required by statute.

 _______________________________

Neil D. Levin

Superintendent of Insurance

July 17, 1998