An interesting, yet frustrating, case is playing out in federal court between the Pennsylvania legislature and an insurance company they created. Pennsylvania wants to reclaim $200 million dollars from the insurance company, the Pennsylvania Professional Liability Joint Underwriting Association (JUA), and has threatened to dissolve the company if they don’t comply.
So, the company sued. In fact, they’ve sued three times over this issue. But why is this case so important for people? Let’s look into what this company really does.
What is malpractice insurance?
John F. Cordisco, attorney and founder of Cordisco Saile, explains the basics. “When doctors make a mistake, malpractice insurance pays the costs to the injured individual. All doctors in Pennsylvania are required to carry malpractice insurance. Like car insurance, if you make a mistake your premiums go way up.”
But not every doctor can cover the premiums for a plan, especially if they’ve made several mistakes in the past. The premiums are just too high. A medical malpractice crisis in the 70s caused the Pennsylvania legislature to create the JUA as an insurer of last resort. They have to take any doctor and can charge premiums.
This insurance company was created as a private entity, even though it was the government who made it. And therein lies the rub for this situation. The JUA says that the government has no authority over its money. The company has its own buildings and its employees are not employed by the state. Legally, they’re on firm ground against the seizure of their assets, and the courts have agreed.
What if they lost?
If the JUA has lost its money, or worse, dissolved, that would have put patients at extreme risk. Any doctor who was covered by JUA would lose coverage. If they then lost a malpractice case, where would the money to pay the plaintiff for their injuries come from? The doctor might lose their assets entirely and still not have enough money to pay.
The reason that the legislature is so gung-ho about trying to get that money is that they’re trying to overcome a budget shortfall. They think that the JUAs reserves are too large to pay plaintiffs who sue. But insurance companies need that buffer in order to stay in business. You never know when a new product or procedure might cause a wave of malpractice suits after a problem is discovered.
Responsible doctors must carry malpractice insurance. Accidents happen. But if doctors cannot rely on their policies to pay out then that makes it extremely risky to practice medicine. Many would likely drop out if they couldn’t get with another provider, and that could start a health crisis in the state.
Moreover, governments shouldn’t try to reach into the pockets of private companies like this, even if they were state-created. The court was right to call this a violation of the 5th and 14th Amendments. Will the government try again, and could we see a Supreme Court case from this issue? Time will tell.