State-Run Medical Malpractice Fund Accused of Withholding Funding From Healthcare Providers

Case Overview

This case involves a state-run fund for medical malpractice claims that allegedly claimed disproportionately large reserves from healthcare providers. An actuarial expert familiar with two specific provisions of the fund dealing with actuarial communications and unpaid claims estimates was sought to review claims data and help determine the adequate amount of reserves that should be allocated for this fund.

Questions to the Insurance expert and their responses

Are you familiar and comfortable working with Actuarial Standards 41 and 43?

I am a certified financial examiner, a certified public accountant, and served as chief state financial examiner. I was an insurance regulator for almost 30 years, and my tasks included the analysis of all types of insurance companies, including malpractice companies and including the reserves for such companies. I reviewed reserves of companies in the process of financial examinations to determine their financial condition, as well as reviewed the results of actuaries who reviewed or prepared/set reserves.

How would you determine what adequate reserves would be in this situation and what information would you use to figure it out?

To determine adequate reserves is a very complex area, but to put it simply, there are two main ways to review adequacy: 1) review the development of an entity's claims over time, on a year-to-year basis to determine if the previous reserve development was adequate or was understated. From this you can also impute forward possible redundancies or deficiencies based on past trends. Or 2) compare an entity's reserve development (adequacy) to industry experience. This is often done in a situation where an entity may be young and not have extensive experience. So lacking one's own experience, you look at the industry as a whole as to how much reserves need to be established for specific types of claim reserves.

About the expert

This highly qualified expert has 30 years of experience in the Insurance industry. With a rewarding career in the State of Missouri, he served as the Chief Financial Examiner and Director of the Division of Insurance Company Regulation for over 22 years. He was responsible for the overview of Missouri?s insurance industry and was directly responsible for all agreements, transactions, mergers and acquisitions. He received his B.S. in Finance from Missouri State University and his MBA from the University of Missouri with an emphasis in entrepreneurship. This expert has first-hand experience implementing budgets and served as an advisor to the Insurance Director regarding all financial and policy matters. He is dual-certified as a Public Accountant and Financial Examiner as well as a Chartered Global Management Accountant by the American Institute of Certified Public Accountants. Currently, he is the President and Founder of a consulting firm in the Greater Kansas City Area. His company focuses on insurance regulatory and a recent project of theirs includes the NAIC Accreditation Review Team.

E-035495

Specialties:

Insurance

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