Senate Bill sb0560c1
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Florida Senate - 2003 CS for SB 560
By the Committee on Health, Aging, and Long-Term Care; and
Senator Saunders
317-1983-03
1 A bill to be entitled
2 An act relating to medical malpractice;
3 amending s. 456.049, F.S.; requiring the
4 Department of Health to report certain
5 liability claims to the Office of Insurance
6 Regulation; amending s. 627.062, F.S.;
7 prohibiting certain bad-faith or punitive
8 damages judgments from influencing rates or
9 justifying rate changes; amending s. 627.357,
10 F.S.; providing guidelines for the formation
11 and regulation of certain self-insurance funds;
12 amending s. 627.912, F.S.; providing for the
13 adoption of requirements relating to certain
14 reports filed with the Office of Insurance
15 Regulation; requiring the office to impose
16 certain fines; creating s. 627.9121, F.S.;
17 requiring certain claims, judgments, or
18 settlements to be reported to the Office of
19 Insurance Regulation; providing penalties;
20 requiring the Office of Program Policy Analysis
21 and Government Accountability to study and
22 report to the Legislature on requirements for
23 coverage by the Florida Birth-Related
24 Neurological Injury Compensation Association;
25 authorizing health care facilities to apply to
26 the Department of Financial Services for
27 discounts in insurance rates after reducing
28 adverse incidents and serious events at the
29 facility; requiring health care facilities to
30 apply to the Department of Financial Services
31 for the certification of programs recommended
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1 by the Florida Center for Excellence in Health
2 Care; requiring the Department of Financial
3 Services to develop criteria for the
4 certification; requiring insurers to file rates
5 with the Department of Financial Services for
6 review under specified circumstances; providing
7 a contingent effective date.
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9 Be It Enacted by the Legislature of the State of Florida:
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11 Section 1. Subsection (3) is added to section 456.049,
12 Florida Statutes, to read:
13 456.049 Health care practitioners; reports on
14 professional liability claims and actions.--
15 (3) The department must forward the information
16 collected under this section to the Office of Insurance
17 Regulation.
18 Section 2. Subsection (2) of section 627.062, Florida
19 Statutes, is amended to read:
20 627.062 Rate standards.--
21 (2) As to all such classes of insurance:
22 (a) Insurers or rating organizations shall establish
23 and use rates, rating schedules, or rating manuals to allow
24 the insurer a reasonable rate of return on such classes of
25 insurance written in this state. A copy of rates, rating
26 schedules, rating manuals, premium credits or discount
27 schedules, and surcharge schedules, and changes thereto, shall
28 be filed with the department under one of the following
29 procedures:
30 1. If the filing is made at least 90 days before the
31 proposed effective date and the filing is not implemented
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1 during the department's review of the filing and any
2 proceeding and judicial review, then such filing shall be
3 considered a "file and use" filing. In such case, the
4 department shall finalize its review by issuance of a notice
5 of intent to approve or a notice of intent to disapprove
6 within 90 days after receipt of the filing. The notice of
7 intent to approve and the notice of intent to disapprove
8 constitute agency action for purposes of the Administrative
9 Procedure Act. Requests for supporting information, requests
10 for mathematical or mechanical corrections, or notification to
11 the insurer by the department of its preliminary findings
12 shall not toll the 90-day period during any such proceedings
13 and subsequent judicial review. The rate shall be deemed
14 approved if the department does not issue a notice of intent
15 to approve or a notice of intent to disapprove within 90 days
16 after receipt of the filing.
17 2. If the filing is not made in accordance with the
18 provisions of subparagraph 1., such filing shall be made as
19 soon as practicable, but no later than 30 days after the
20 effective date, and shall be considered a "use and file"
21 filing. An insurer making a "use and file" filing is
22 potentially subject to an order by the department to return to
23 policyholders portions of rates found to be excessive, as
24 provided in paragraph (h).
25 (b) Upon receiving a rate filing, the department shall
26 review the rate filing to determine if a rate is excessive,
27 inadequate, or unfairly discriminatory. In making that
28 determination, the department shall, in accordance with
29 generally accepted and reasonable actuarial techniques,
30 consider the following factors:
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1 1. Past and prospective loss experience within and
2 without this state.
3 2. Past and prospective expenses.
4 3. The degree of competition among insurers for the
5 risk insured.
6 4. Investment income reasonably expected by the
7 insurer, consistent with the insurer's investment practices,
8 from investable premiums anticipated in the filing, plus any
9 other expected income from currently invested assets
10 representing the amount expected on unearned premium reserves
11 and loss reserves. The department may promulgate rules
12 utilizing reasonable techniques of actuarial science and
13 economics to specify the manner in which insurers shall
14 calculate investment income attributable to such classes of
15 insurance written in this state and the manner in which such
16 investment income shall be used in the calculation of
17 insurance rates. Such manner shall contemplate allowances for
18 an underwriting profit factor and full consideration of
19 investment income which produce a reasonable rate of return;
20 however, investment income from invested surplus shall not be
21 considered. The profit and contingency factor as specified in
22 the filing shall be utilized in computing excess profits in
23 conjunction with s. 627.0625.
24 5. The reasonableness of the judgment reflected in the
25 filing.
26 6. Dividends, savings, or unabsorbed premium deposits
27 allowed or returned to Florida policyholders, members, or
28 subscribers.
29 7. The adequacy of loss reserves.
30 8. The cost of reinsurance.
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1 9. Trend factors, including trends in actual losses
2 per insured unit for the insurer making the filing.
3 10. Conflagration and catastrophe hazards, if
4 applicable.
5 11. A reasonable margin for underwriting profit and
6 contingencies.
7 12. The cost of medical services, if applicable.
8 13. Other relevant factors which impact upon the
9 frequency or severity of claims or upon expenses.
10 (c) In the case of fire insurance rates, consideration
11 shall be given to the availability of water supplies and the
12 experience of the fire insurance business during a period of
13 not less than the most recent 5-year period for which such
14 experience is available.
15 (d) If conflagration or catastrophe hazards are given
16 consideration by an insurer in its rates or rating plan,
17 including surcharges and discounts, the insurer shall
18 establish a reserve for that portion of the premium allocated
19 to such hazard and shall maintain the premium in a catastrophe
20 reserve. Any removal of such premiums from the reserve for
21 purposes other than paying claims associated with a
22 catastrophe or purchasing reinsurance for catastrophes shall
23 be subject to approval of the department. Any ceding
24 commission received by an insurer purchasing reinsurance for
25 catastrophes shall be placed in the catastrophe reserve.
26 (e) Any portion of a judgment entered as a result of a
27 statutory or common-law bad-faith action and any portion of a
28 judgment entered which awards punitive damages against an
29 insurer may not be included in the insurer's rate base, and
30 shall not be used to justify a rate or rate change. Any
31 portion of a settlement entered as a result of a statutory or
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1 common-law bad-faith action identified as such and any portion
2 of a settlement wherein an insurer agrees to pay specific
3 punitive damages may not be used to justify a rate or rate
4 change. The portion of the taxable costs and attorney's fees
5 which is identified as being related to the bad faith and
6 punitive damages in these judgments and settlements may not be
7 included in the insurer's rate base and may not be utilized to
8 justify a rate or rate change.
9 (f)(e) After consideration of the rate factors
10 provided in paragraphs (b), (c), and (d), and (e), a rate may
11 be found by the department to be excessive, inadequate, or
12 unfairly discriminatory based upon the following standards:
13 1. Rates shall be deemed excessive if they are likely
14 to produce a profit from Florida business that is unreasonably
15 high in relation to the risk involved in the class of business
16 or if expenses are unreasonably high in relation to services
17 rendered.
18 2. Rates shall be deemed excessive if, among other
19 things, the rate structure established by a stock insurance
20 company provides for replenishment of surpluses from premiums,
21 when the replenishment is attributable to investment losses.
22 3. Rates shall be deemed inadequate if they are
23 clearly insufficient, together with the investment income
24 attributable to them, to sustain projected losses and expenses
25 in the class of business to which they apply.
26 4. A rating plan, including discounts, credits, or
27 surcharges, shall be deemed unfairly discriminatory if it
28 fails to clearly and equitably reflect consideration of the
29 policyholder's participation in a risk management program
30 adopted pursuant to s. 627.0625.
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1 5. A rate shall be deemed inadequate as to the premium
2 charged to a risk or group of risks if discounts or credits
3 are allowed which exceed a reasonable reflection of expense
4 savings and reasonably expected loss experience from the risk
5 or group of risks.
6 6. A rate shall be deemed unfairly discriminatory as
7 to a risk or group of risks if the application of premium
8 discounts, credits, or surcharges among such risks does not
9 bear a reasonable relationship to the expected loss and
10 expense experience among the various risks.
11 (g)(f) In reviewing a rate filing, the department may
12 require the insurer to provide at the insurer's expense all
13 information necessary to evaluate the condition of the company
14 and the reasonableness of the filing according to the criteria
15 enumerated in this section.
16 (h)(g) The department may at any time review a rate,
17 rating schedule, rating manual, or rate change; the pertinent
18 records of the insurer; and market conditions. If the
19 department finds on a preliminary basis that a rate may be
20 excessive, inadequate, or unfairly discriminatory, the
21 department shall initiate proceedings to disapprove the rate
22 and shall so notify the insurer. However, the department may
23 not disapprove as excessive any rate for which it has given
24 final approval or which has been deemed approved for a period
25 of 1 year after the effective date of the filing unless the
26 department finds that a material misrepresentation or material
27 error was made by the insurer or was contained in the filing.
28 Upon being so notified, the insurer or rating organization
29 shall, within 60 days, file with the department all
30 information which, in the belief of the insurer or
31 organization, proves the reasonableness, adequacy, and
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1 fairness of the rate or rate change. The department shall
2 issue a notice of intent to approve or a notice of intent to
3 disapprove pursuant to the procedures of paragraph (a) within
4 90 days after receipt of the insurer's initial response. In
5 such instances and in any administrative proceeding relating
6 to the legality of the rate, the insurer or rating
7 organization shall carry the burden of proof by a
8 preponderance of the evidence to show that the rate is not
9 excessive, inadequate, or unfairly discriminatory. After the
10 department notifies an insurer that a rate may be excessive,
11 inadequate, or unfairly discriminatory, unless the department
12 withdraws the notification, the insurer shall not alter the
13 rate except to conform with the department's notice until the
14 earlier of 120 days after the date the notification was
15 provided or 180 days after the date of the implementation of
16 the rate. The department may, subject to chapter 120,
17 disapprove without the 60-day notification any rate increase
18 filed by an insurer within the prohibited time period or
19 during the time that the legality of the increased rate is
20 being contested.
21 (i)(h) In the event the department finds that a rate
22 or rate change is excessive, inadequate, or unfairly
23 discriminatory, the department shall issue an order of
24 disapproval specifying that a new rate or rate schedule which
25 responds to the findings of the department be filed by the
26 insurer. The department shall further order, for any "use and
27 file" filing made in accordance with subparagraph (a)2., that
28 premiums charged each policyholder constituting the portion of
29 the rate above that which was actuarially justified be
30 returned to such policyholder in the form of a credit or
31 refund. If the department finds that an insurer's rate or rate
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1 change is inadequate, the new rate or rate schedule filed with
2 the department in response to such a finding shall be
3 applicable only to new or renewal business of the insurer
4 written on or after the effective date of the responsive
5 filing.
6 (j)(i) Except as otherwise specifically provided in
7 this chapter, the department shall not prohibit any insurer,
8 including any residual market plan or joint underwriting
9 association, from paying acquisition costs based on the full
10 amount of premium, as defined in s. 627.403, applicable to any
11 policy, or prohibit any such insurer from including the full
12 amount of acquisition costs in a rate filing.
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14 The provisions of this subsection shall not apply to workers'
15 compensation and employer's liability insurance and to motor
16 vehicle insurance.
17 Section 3. Subsection (10) of section 627.357, Florida
18 Statutes, is amended to read:
19 627.357 Medical malpractice self-insurance.--
20 (10)(a)1. An application to form a self-insurance fund
21 under this section must be filed with the Office of Insurance
22 Regulation A self-insurance fund may not be formed under this
23 section after October 1, 1992.
24 2. The office must ensure that self-insurance funds
25 remain solvent and provide insurance coverage purchased by
26 participants. The Office of Insurance Regulation may adopt
27 rules pursuant to ss. 120.536(1) and 120.54 to implement this
28 section.
29 Section 4. Subsections (2) and (4) of section 627.912,
30 Florida Statutes, are amended to read:
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1 627.912 Professional liability claims and actions;
2 reports by insurers.--
3 (2) The reports required by subsection (1) shall
4 contain:
5 (a) The name, address, and specialty coverage of the
6 insured.
7 (b) The insured's policy number.
8 (c) The date of the occurrence which created the
9 claim.
10 (d) The date the claim was reported to the insurer or
11 self-insurer.
12 (e) The name and address of the injured person. This
13 information is confidential and exempt from the provisions of
14 s. 119.07(1), and must not be disclosed by the department
15 without the injured person's consent, except for disclosure by
16 the department to the Department of Health. This information
17 may be used by the department for purposes of identifying
18 multiple or duplicate claims arising out of the same
19 occurrence.
20 (f) The date of suit, if filed.
21 (g) The injured person's age and sex.
22 (h) The total number and names of all defendants
23 involved in the claim.
24 (i) The date and amount of judgment or settlement, if
25 any, including the itemization of the verdict, together with a
26 copy of the settlement or judgment.
27 (j) In the case of a settlement, such information as
28 the department may require with regard to the injured person's
29 incurred and anticipated medical expense, wage loss, and other
30 expenses.
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1 (k) The loss adjustment expense paid to defense
2 counsel, and all other allocated loss adjustment expense paid.
3 (l) The date and reason for final disposition, if no
4 judgment or settlement.
5 (m) A summary of the occurrence which created the
6 claim, which shall include:
7 1. The name of the institution, if any, and the
8 location within the institution at which the injury occurred.
9 2. The final diagnosis for which treatment was sought
10 or rendered, including the patient's actual condition.
11 3. A description of the misdiagnosis made, if any, of
12 the patient's actual condition.
13 4. The operation, diagnostic, or treatment procedure
14 causing the injury.
15 5. A description of the principal injury giving rise
16 to the claim.
17 6. The safety management steps that have been taken by
18 the insured to make similar occurrences or injuries less
19 likely in the future.
20 (n) Any other information required by the department
21 to analyze and evaluate the nature, causes, location, cost,
22 and damages involved in professional liability cases. The
23 Office of Insurance Regulation shall adopt by rule
24 requirements for additional information to assist the office
25 in its analysis and evaluation of the nature, causes,
26 location, cost, and damages involved in professional liability
27 cases reported by insurers under this section.
28 (4) There shall be no liability on the part of, and no
29 cause of action of any nature shall arise against, any insurer
30 reporting hereunder or its agents or employees or the
31 department or its employees for any action taken by them under
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1 this section. The department must may impose a fine of $250
2 per day per case, but not to exceed a total of $1,000 per
3 case, against an insurer that violates the requirements of
4 this section. This subsection applies to claims accruing on or
5 after October 1, 1997.
6 Section 5. Section 627.9121, Florida Statutes, is
7 created to read:
8 627.9121 Required reporting of claims;
9 penalties.--Each entity that makes payment under a policy of
10 insurance, self-insurance, or otherwise in settlement or
11 partial settlement of, or in satisfaction of a judgment in, a
12 medical malpractice action or claim that is required to report
13 information to the National Practitioner Data Bank under 42
14 U.S.C. section 11131 must also report the same information to
15 the Office of Insurance Regulation. The Office of Insurance
16 Regulation shall include such information in the data that it
17 compiles under s. 627.912. The office must compile and review
18 the data collected pursuant to this section and must assess an
19 administrative fine on any entity that fails to fully comply
20 with the requirements imposed by law.
21 Section 6. The Office of Program Policy Analysis and
22 Government Accountability shall complete a study of the
23 eligibility requirements for a birth to be covered under the
24 Florida Birth-Related Neurological Injury Compensation
25 Association and submit a report to the Legislature by January
26 1, 2004, recommending whether or not the statutory criteria
27 for a claim to qualify for referral to the Florida
28 Birth-Related Neurological Injury Compensation Association
29 under section 766.302, Florida Statutes, should be modified.
30 Section 7. Patient safety discount.--A health care
31 facility licensed pursuant to chapter 395, Florida Statutes,
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1 may apply to the Department of Financial Services for
2 certification of any program that is recommended by the
3 Florida Center for Excellence in Health Care to reduce adverse
4 incidents, as defined in section 395.0197, Florida Statutes,
5 which result in the reduction of serious events at that
6 facility. The department shall develop criteria for such
7 certification. Insurers shall file with the department a
8 discount in the rate or rates applicable for insurance
9 coverage to reflect the effect of a certified program. A
10 health care facility shall receive a discount in the rate or
11 rates applicable for mandated basic insurance coverage
12 required by law. In reviewing filings under this section, the
13 department shall consider whether, and the extent to which,
14 the program certified under this section is otherwise covered
15 under a program of risk management offered by an insurance
16 company or exchange or self-insurance plan providing medical
17 professional liability coverage.
18 Section 8. This act shall take effect upon becoming a
19 law if SB 562, SB 564, and SB 566 or similar legislation is
20 adopted in the same legislative session or extension thereof
21 and becomes law.
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1 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
2 Senate Bill 560
3
4 The committee substitute requires the Department of Health to
forward to the Office of Insurance Regulation information that
5 it collects from Florida-licensed physicians and dentists
regarding professional liability claims that are not otherwise
6 reported to the Office of Insurance Regulation.
7 The rating standards for certain property, casualty, and
surety insurances are revised to prohibit the inclusion of
8 payments made by insurers for bad faith or punitive damages in
the insurer's rate base. Such payments shall not be used to
9 justify a rate or rate change.
10 The bill eliminates an existing prohibition against creating
new medical malpractice self-insurance funds. The Office of
11 Insurance Regulation is authorized to adopt rules relating to
medical malpractice self-insurance funds.
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The Office of Insurance Regulation is required to adopt rules
13 regarding information about professional liability closed
claims that will assist the office in analyzing the
14 nature,causes,location,cost and damages involved in such
claims and is required to impose a fine against insurers for
15 violations of the closed claims reporting requirements. The
bill requires additional entities to report medical
16 malpractice actions or claims to the Office of Insurance
Regulation.
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The bill requires the Office of Program Policy Analysis and
18 Government Accountability to study the eligibility
requirements for a birth to be covered under the Florida
19 Birth-Related Neurological Injury Compensation Association and
report to the Legislature by January 1, 2004.
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Hospitals, ambulatory surgical centers, and mobile surgical
21 facilities are authorized to apply to the Department of
Financial Services for certification of any program that is
22 recommended by the Florida Center for Excellence in Health
Care to reduce adverse incidents. Insurers must file with the
23 department a discount in the rate or rates applicable for
insurance coverage to reflect the effect of a certified
24 program and these facilities must receive a discount in the
rate or rates applicable for mandated basic insurance coverage
25 required by law.
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