Topic:
LEGISLATION; MEDICAL MALPRACTICE INSURANCE; MEDICAL MALPRACTICE;
Location:
INSURANCE - MALPRACTICE;

OLR Research Report


March 16, 2004

 

2004-R-0324

MEDICAL MALPRACTICE-NEW JERSEY LEGISLATION

By: George Coppolo, Chief Attorney

You asked for a copy and summary of a bill currently being considered by the New Jersey legislature-Bill Assembly Bill 50.

SUMMARY

The New Jersey Assembly Financial Institutions and Insurance Committee reported out Substitute Assembly Bill 50 on March 4, 2004.

The bill has numerous tort reforms, health care system reforms, insurance reforms, and creates a 17-member task force to study various issues, including the imposition of damage caps.

The tort reforms deal with such topics as lawsuits by minors, mandatory mediation, qualifications of expert witnesses, and structural payments of damages.

The health care system reforms expand the “Good Samaritan” law, provide immunity for health care professionals in emergency situations, and strengthen the reporting requirements by physicians to the State Board of Medical Examiners.

The insurance reforms deal with such areas as conflicts of interest, insurance purchasing alliances, deductibles, notices of renewal and nonrenewal, a fill and use system, capitalization and reserve requirements, minimum insurance requirements for physicians, a premium assistance fund, and a student loan reimbursement program.

This report is based on the committee's report covering tax legislation.

TORT LIABILITY REFORMS

Lawsuits by Minors

The bill provides that actions by or on behalf of a minor that have accrued for medical malpractice for injuries sustained at birth must be commenced prior to the minor's 13th birthday, and do not affect the discovery doctrine in any way.

Court Mediation

The bill provides for court referral of a medical malpractice action to a dispute resolution mechanism if the judge presiding over the action determines, within 30 days after the discovery end date, that the referral may encourage early disposition or settlement of the action. If the judge makes that determination, the matter is to be referred to dispute resolution pursuant to New Jersey Court Rules.

Affidavit of Noninvolvement

The bill also allows a health care provider named as a defendant in a medical malpractice action to file an affidavit of noninvolvement with the court. The affidavit of noninvolvement sets forth the facts that demonstrate that the provider was misidentified or otherwise not involved, individually or through its servants or employees, in the care and treatment of the claimant, and was not obligated, either individually or through its servants or employees, to provide for the care and treatment of the claimant. The bill also provides penalties for false statements made in the affidavit or in challenging the affidavit.

Qualifications for Expert Witnesses

The bill establishes qualifications for expert witnesses in medical malpractice actions and for the purpose of executing an affidavit of merit, and provides that an expert must have the same type of practice and possess the same credentials, as applicable, as the defendant health care provider, unless waived by the court. It prohibits expert witnesses from testifying on a contingency fee basis and provides for penalties for expert witnesses who intentionally misrepresent the applicable standard of practice or care. It also provides for penalties for an individual or entity who threatens to take or takes adverse action against a person in retaliation for that person providing or agreeing to provide expert testimony, or for that person executing an affidavit of merit, which adverse action relates to that person's employment, accreditation, certification, credentialing or licensure.

Structured Payments

With respect to the payment of medical malpractice judgments, the bill provides that in any medical malpractice judgment in which the noneconomic damages (those for pain and suffering) are $1 million or less, unless otherwise agreed to by the parties, the court must enter a judgment ordering that money damages be paid immediately. In any judgment in which the noneconomic damages exceed $1 million, unless otherwise agreed to by the parties, 50% of the money damages must be paid immediately, with the costs and attorney's fees paid from that amount. The remaining 50% of the judgment must be paid over 60 months in the form of a structured payment agreement.

Standards for Review

     

Further, in order to provide the court with discretion to modify jury awards, the bill modifies the standard of review a court must use in reviewing the amount of a jury award. It requires the court to consider the evidence in the light most favorable to the non-moving party and to allow the court to determine whether the award is clearly inadequate or excessive in view of the nature of the medical condition or injury that is the cause of action or because of passion or prejudice by the jury.

HEALTH CARE SYSTEM REFORMS

Good Samaritan Law

The bill expands the State's "Good Samaritan" law to provide immunity from civil damages to licensed health care professionals, emergency medical technicians and mobile intensive care paramedics whose duty does not require a response to a patient emergency situation, who, in good faith, respond to a life-threatening emergency or respond to a request for emergency assistance in a life-threatening emergency within a hospital or other licensed health care facility or a State psychiatric hospital operated by the Department of Human Services. The immunity does not apply to acts or omissions constituting gross negligence, recklessness or willful misconduct; if a provider-patient relationship existed before the emergency; if consideration in any form is

provided to the health care professional for the service rendered; or if a general hospital has not reasonably and adequately staffed its emergency department.

Emergency Situations

Further, the bill provides that a health care professional is not liable for civil damages for injury or death caused in an emergency situation occurring in the health care professional's private practice or in a health care facility or state psychiatric hospital on account of a failure to inform a patient of the possible consequences of a medical procedure when the failure to inform is caused by any of the following:

1. the patient was unconscious;

2. the medical procedure was undertaken without the consent of the patient because the health care professional reasonably believed that the medical procedure should be undertaken immediately and that there was insufficient time to fully inform the patient; or

3. the medical procedure was performed on a person legally incapable of giving informed consent, and the health care professional reasonably believed that the medical procedure should be undertaken immediately and that there was insufficient time to obtain the informed consent of the person authorized to give such consent for the patient.

The immunity provided is applicable only to actions for damages for an injury or death arising as a result of a health care professional's failure to inform, and not to actions for damages arising as a result of a health care professional's negligence in rendering or failing to render treatment.

REPORTING REQUIREMENTS

The bill strengthens reporting requirements by physicians to the State Board of Medical Examiners (BME) to ensure that the BME is promptly informed of any pending or final action by any criminal authority in the state or any other state or federal jurisdiction or any arrest or conviction for a criminal or quasi-criminal act. A physician must report, within 10 days, the action or his arrest or conviction, for crimes that include, but are not limited to, criminal homicide, aggravated assault, sexual assault, criminal sexual contact or lewdness, or an offense involving any controlled dangerous substance.

The bill also ensures that health care facilities, state psychiatric hospitals, and other physicians affiliated with a physician who has been disciplined by the BME, are notified of its action, within 30 days of the action. Similarly, the bill ensures that a health care facility, state psychiatric hospital or health maintenance organization is promptly notified by the BME if, during the course of an investigation of a physician, it requests information from that facility or health maintenance organization regarding that physician, and subsequently determines that no disciplinary action is warranted.

MEDICAL MALPRACTICE LIABILITY INSURANCE REFORMS:

Conflicts of Interests

To avoid the appearance of any conflicts of interest, the bill prohibits any person who is an officer, director or board member of a professional association for health care providers to serve concurrently as an officer, director or board member of a state-domiciled medical malpractice liability insurer that is issuing policies in the state.

Insurance Purchasing Alliance

The bill permits physicians to join together, by means of a joint contract, to form a "Medical Malpractice Liability Insurance Purchasing Alliance" to negotiate a reduced medical malpractice liability insurance premium.

Consent of the Insured

The bill provides that a medical malpractice liability insurance policy may contain a provision that provides a person insured under the policy with the exclusive right to require the insurer to obtain the consent of the insured to settle any claim filed against the insured; but, if the policy contains that provision, the insurer would be required to offer an endorsement to the policy that permits the insurer to settle a claim filed under the policy without first having obtained the insured's consent. The insurer would be required to establish a premium for the endorsement, which reflects any savings or reduced costs attributable to the endorsement, and the insured would have the option of accepting or refusing the endorsement.

Deductibles

The bill requires every medical malpractice liability insurer to offer individual or group medical malpractice liability insurance policies with a deductible, at the option of the insured, in an amount of at least $5,000 per claim and up to $1 million per claim, with the insurer being permitted to require the insured to provide collateral for the deductible amount to the insurer. The deductibles offered by an insurer are subject to the approval of the Commissioner of Banking and Insurance. For

policies with any deductible, the insurer would be responsible for payment of the deductible and would be reimbursed for that amount by the insured.

Annual Statement

The bill requires that every annual statement filed by a medical malpractice insurer in this State with the Department of Banking and Insurance include a certification by the chief executive officer or chief financial officer that the rates for every category, subcategory or risk classification are adequate to cover expected losses and expenses of the insurer and to ensure the safety and soundness of the insurer.

Notice of Renewal and Nonrenewal

The bill requires insurers authorized to transact medical malpractice liability insurance in this State to provide at least 60 days' notice to the insured for policy renewals and nonrenewals. Also, in the case of a nonrenewal, the insurer must provide the reason for the nonrenewal.

File and Use System

The bill provides for implementation by the Commissioner of Banking and Insurance of a "file and use" system with respect to any proposed rate increase by a medical malpractice liability insurer of 15% or more on an annual basis for any medical specialty. Any such increase must be filed with the commissioner at least 45 days prior to becoming effective and include the reason for the proposed change. Unless disapproved by the commissioner prior to its effective date, the rate filing is to be deemed effective; however, the commissioner must disapprove the increase if the commissioner finds that the increased rates are excessive, inadequate or unfairly discriminatory.

Capitalization and Reserve Requirements

The bill directs the commissioner, subject to standards adopted by the National Association of Insurance Commissioners, to review the current capitalization and reserve requirements applicable to medical malpractice insurers, and to modify those requirements, as necessary, to ensure the solvency of those insurers and the availability and affordability of medical malpractice liability insurance in the state.   Also, the bill requires medical malpractice liability insurers to offer their insured the option to make premium payments in installments, as prescribed by the Commissioner of Banking and Insurance, by regulation.

Notification of Malpractice Payments

In addition, N.J.S.A.17:30D-17, which requires all medical malpractice insurers to notify the BME of every medical malpractice judgment, settlement and award involving a physician or podiatrist licensed in this State, is amended to also require notification to the Commissioner of Banking and Insurance of these payments. The notification to the commissioner is to enable the commissioner to compile statistical data about medical malpractice payouts, and would not include the name of or other identifying information about the practitioner.

Minimum Insurance Requirements

The bill removes from the BME the authority and discretion to set the minimum amounts of medical malpractice liability insurance that a physician who maintains a professional medical practice in the state and has responsibility for patient care is required to carry, and instead establishes those minimum amounts by statute. The bill sets the limits at those currently in effect by virtue of regulations promulgated by the BME, that is, medical malpractice liability insurance in the sum of $1 million per occurrence and $3 million per policy year, with extended reporting endorsement coverage for claims made, also known as "tail coverage;" or, if liability coverage is not available, by a letter of credit for at least $500,000. The BME may, however, increase these minimum amounts by regulation.

Premium Assistance Fund

The bill establishes the Medical Malpractice Liability Insurance Premium Assistance Fund in the Department of the Treasury to provide relief towards the payment of medical malpractice liability insurance premiums to certain health care providers in the state who have experienced or are experiencing a liability insurance premium increase in an amount as established by the Commissioner of Banking and

Insurance by regulation. The fund will be administered by the Department of Banking and Insurance, and will expire three years after the effective date of the bill.

Certification of Classes of Providers. The bill provides that the Commissioner of Banking and Insurance will certify classes of health care providers (practitioners), by specialty and subspecialty for each type of practitioner, whose average medical malpractice premium, as a class, on or after December 31, 2002, is in excess of an amount determined by the commissioner, or in the case of health care providers whose professional liability insurance protection is provided through self-insured hospital funding supplemented with purchased commercial insurance, the total professional liability funding obligation has increased in excess of an amount determined by the commissioner. In certifying classes eligible for the subsidy, the commissioner, in consultation with the Commissioner of Health and Senior Services, may also consider if access to care is threatened by the inability of a significant number of practitioners, in a particular specialty or subspecialty, to continue practicing in a geographic area of the state.

Eligibility. In order to be eligible for a subsidy from the fund, a practitioner must have received a medical malpractice liability insurance premium increase in an amount determined by the commissioner by regulation, for one or more of the following: upon renewal on or after January 1, 2004, from the amount paid by that practitioner in 2003; upon renewal on or after January 1, 2005, from the amount paid by that practitioner in 2004; and upon renewal on or after January 1, 2006, from the amount paid by that practitioner in 2005. The amount of the subsidy will be determined by the commissioner by regulation.

Self-Insured. In the case of a health care provider providing professional liability insurance protection through self-insured hospital funding supplemented with purchased commercial insurance coverage, that provider must have increased its total professional liability funding obligation in an amount as determined by the commissioner by regulation, for one or more of the following: upon renewal on or after January 1, 2004, from the professional liability funding obligation paid by that practitioner in calendar year 2003; upon renewal on or after January 1, 2005, from the professional liability funding obligation paid by that practitioner in calendar year 2004; and upon renewal on or after January 1, 2006, from the professional liability funding obligation paid by that practitioner in calendar year 2005.

Renewal Services. The Medical Malpractice Liability Insurance Premium Assistance Fund includes the following revenue:

1. an annual surcharge of $3 per employee for all employers who are subject to the New Jersey "unemployment compensation law";

2. an annual charge of $50 imposed on each licensed physician, podiatrist, chiropractor, dentist and optometrist by the appropriate professional licensing board; and

3. an annual fee of $50 imposed on each licensed attorney by the State Treasurer.

The above revenue-raising provisions will not apply to physicians, podiatrists, chiropractors, dentists, optometrists or attorneys who are statutorily or constitutionally barred from the practice of their respective profession; can show that they do not maintain a bona fide office for the practice of their profession in this State; are completely retired from the practice of their profession; are on full-time duty with the armed forces, VISTA or the Peace Corps and not engaged in practice; have not practiced their profession for at least one year; or, in the case of attorneys, are ineligible to practice law because they have not made their New Jersey Lawyers' Fund for Client Protection payment.

Ineligibility. The bill also specifies that a practitioner who has been subject to a disciplinary action or civil penalty by the practitioner's licensing board, when that action or penalty relates to the provider's provision of, or failure to provide, treatment or care to a patient, is not eligible for a subsidy from the fund.

Two-Year Commitment. The bill requires that a health care provider who receives a subsidy from the fund practice in that provider's specialty or subspecialty in this State for a period of at least two years after receipt of the subsidy. A health care provider who fails to comply with this requirement must repay the Commissioner of Banking and Insurance the amount of the subsidy, in whole or in part as determined by the commissioner.

Fund Allocation. The monies in the Medical Malpractice Liability Insurance Premium Assistance Fund are specifically dedicated and to be utilized exclusively for the following purposes:

1. $20 million allocated for the purpose of providing relief towards the payment of medical malpractice liability insurance premiums to health care providers in the State who have experienced or are experiencing a liability insurance premium increase in an amount as established by the commissioner by regulation and meet the criteria established under the bill;

2. $8 million allocated to the Health Care Subsidy Fund for the purpose of providing payments to hospitals in accordance with the formula used for the distribution of charity care subsidies;

3. $2 million allocated for a student loan expense reimbursement program for health care providers who are members of specialties and subspecialties who qualify for relief from the fund (as described below); and

4. the balance of any unexpended monies in the fund allocated to the Division of Medical Assistance and Health Services in the Department of Human Services for the provision of other health care services as determined by the Commissioner of Human Services.

Student Loan Reimbursement Program

The bill establishes a three-year student loan expense reimbursement program within the Higher Education Student Assistance Authority for health care providers who are members of specialties and subspecialties that qualify for relief from the Fund. The authority is to implement the program in consultation with the Commissioners of Banking and Insurance and Health and Senior Services, and to adopt rules and regulations, pursuant to the "Administrative Procedure Act," to effectuate the purposes of this new program, including, but not limited to eligibility for the program, procedures for application, selection of participants, establishment and nullification of contracts established with participants under the program, reports to the program by participants, and recruitment of participants.

Task Force

Finally, the bill establishes a 17-member "Medical Care Availability Task Force" to study the following issues:

1. the advantages and disadvantages of establishing limitations on non-economic damages for medical malpractice judgments and on extending current limitations on liability that apply to nonprofit hospitals to employees, other than physicians, of those hospitals;

2. the impact of third party reimbursement policies by insurers and health maintenance organizations on access to health care services in the context of the current affordability crisis in the state affecting health care providers in the purchase of necessary liability coverage;

3. the advantages and disadvantages of adopting additional changes to the statute of limitations regarding medical malpractice actions;

4. the advantages and disadvantages of establishing additional procedures for mediation of actions alleging medical malpractice and for screening for frivolous medical malpractice lawsuits;

5. the advantages and disadvantages of establishing a pre-suit procedure; and

6. the necessity for, and advantages and disadvantages of, reactivating the Medical Malpractice Reinsurance Association.

The task force may also study the causes, and any related issues, relative to the affordability of medical malpractice liability insurance.

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