Florida regulators considering medical malpractice deal that would result in The Doctors Group and FPIC Insurance Group Holding 30 Percent of Medical Malpractice Insurance Market in the State
A public hearing was held by the Florida Office of Insurance Regulation on July 21, 2011 to discuss The Doctors' Company’s application for acquisition of Florida-based FPIC Insurance Group.
FPIC Insurance Group is a holding company for First Professionals Insurance Company and Anesthesiologists Professional Assurance Company, which provides medical professional liability insurance for physicians, dentists and other healthcare providers. The Doctors’ Company is one of the largest medical malpractice insurers in the nation. To view the meeting agenda, click here.
Below, Gary Fineout, reports on the meeting for The Florida Current:
State insurance regulators asked to sign off on medical malpractice deal
Gary Fineout, 7/21/2011; www.thefloridacurrent.com
The nation’s largest medical malpractice carrier on Thursday defended its proposed acquisition of Jacksonville-based FPIC Insurance Group in a more than two-hour hearing before state regulators.
If eventually approved by regulators in three states, The Doctors Group will have roughly 30 percent of the medical malpractice market in Florida. FPIC Insurance Group is the holding company of two medical malpractice carriers including First Professionals Insurance Company and has roughly 18,000 policyholders.
"We believe the proposed acquisition will truly benefit the physicians of Florida," said Robert Francis, the chief operating officer of The Doctors Group, which is a privately-held company that was set up by physicians back in the '70s.
But while company officials maintained that the Florida market will remain competitive after the sale, company officials couldn’t for sure say what would happen to insurance rates after the merger is completed.
They said that while the combined companies will benefit from “economies in scale” it was hard to predict the rates because The Doctors Group has not yet gotten full access to FPIC’s books.
The California-based carrier announced in May that it was purchasing FPIC Insurance Group for $362 million, representing a 31 percent increase over the stock price of the company before the sale.
The bulk of the presentation from The Doctors Group included assurances that the the market in Florida would remain robust even after the acquisition. The company included a presentation from a Florida State University professor who compared Florida's situation to other large states and predicted that the market would still be vibrant.
The testimony by company officials prompted Reggie Garcia, an attorney with the Florida Justice Association to question the push this past year by state legislators to enact new restrictions on medical malpractice lawsuits.
"It’s amazing when they are under oath, how healthy the market is," Garcia said during a break in the proceedings.
Legislators passed HB 459 which requires that doctors who testify in medical malpractice cases will be required to obtain expert witness certificates. Legislators also passed separate measures that will help doctors affiliated with institutions such as the University of Miami to be shielded from lawsuits.
Francis, responding to questions from reporters about the market environment in the state, said that "I'm not sure what you could to make Florida more competitive."
But Francis did say that while the market is competitive there is a concern about the affordability of coverage. He said that an estimated 30 percent to 40 percent of physicians in Miami-Dade County go bare and do not have any coverage.
State regulators did question various aspects of the proposed transaction, including a plan by The Doctors Group to take $80 million in surplus from FPIC companies in three states and send it “upstream” to the parent company. Regulators wanted to know if this arrangement affected the price that Doctors agreed to pay to acquire FPIC and whether or not the money would be used to pay for future acquisitions. They were told no.
Regulators also pointed out that the state of Florida has turned recent requests by Doctors to raise its premium rates and also asked if the surplus should be used to reduce premiums. State officials also pointed out that they have turned down recent requests by The Doctors Group -- which currently has about 2,600 policyholders in Florida - to raise its rates.
The only public testimony in the two-and-a-half hour hearing came from Garcia. He said that while the Florida Justice Association had no position on the sale, they should consider ordering a reduction in medical malpractice premiums for doctors across the state.
The proposed sale of FPIC Insurance Group has picked up the support of the Florida Medical Association and the Florida Dental Association. The FMA -- which currently is paid a $550,000 a year sponsorship fee by FPIC according to FPIC President Bob White -- said in its letter the transaction would benefit Florida physicians. The letter says The Doctors Group has an “outstanding reputation for service and loyalty to its physician members.”
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