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Engrossed Version House Bill 601 History

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ENGROSSED

H. B. 601


(By Mr. Speaker, Mr. Kiss, and Delegate Trump)

[By Request of the Executive]

[Introduced October 21, 2001; referred to the

Committee on Finance.]



A BILL to amend chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, by adding thereto a new article designated, article thirteen-p; to amend and reenact sections one, two, three, four, five and five-c, article twelve, chapter twenty-nine of said code; and to further amend said article by adding thereto seven new sections, designated sections five-d, five-e, five-f, five-g, thirteen-b, thirteen-c and fourteen, all relating generally to establishment and operation of medical professional liability insurance programs as an alternative to commercial coverage for medical liability claims; creating a tax credit for physicians to assist in paying for medical liability premiums and establishing a termination date; defining certain terms; establishing medical liability programs, including a preferred medical liability program and a high risk medical liability program and exceptions to participation; expanding the board of risk and insurance management and establishing reimbursement, establishing a procedure for appointment to the board and expanding the powers and duties of the board; providing for employment of executive director and specifying powers and duties of the director; establishing special revenue account in state treasury for deposit of collected premiums and for expenditure and investment of funds in the account; providing for payment of start up operating expenses of medical liability board and a pool from which claims may be paid and for amounts so paid to be reimbursed from collected premiums; requiring certain documentation to pay a medical liability settlement or judgment; providing sole authority to the board to settle and release claims; requiring board to submit certain reports to licensing authorities; exempting specific claim reserve information from disclosure under state freedom of information act; requiring board to post supersedeas bond when it appeals a medical liability judgment against a health care provider; providing for apportionment of interest accruing prejudgment or post-judgment on certain claims; establishing a rule making procedure; establishing the ability to do a governmental transfer of up to ten million dollars from the Tobacco Settlement medical trust fund if appropriated by the legislature; specifying that up to ten million dollars could be made available by appropriation by the legislature to provide capitalization for a private entity to establish a medical liability insurance company; specifying effective date; and allowing policies written after the effective date to be retroactive to the effective date.

Be it enacted by the Legislature of West Virginia:
That chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended by adding thereto a new article designated article thirteen-p; that sections one, two, three, four, five and five-c, article twelve, chapter twenty- nine of said code be amended and reenacted; and that said article be further amended by adding thereto seven new sections, designated sections five-d, five-e, five-f, five-g, thirteen-b, thirteen-c and fourteen, all to read as follows:
CHAPTER 11. TAXATION.
ARTICLE 13P.
TAX CREDIT FOR MEDICAL LIABILITY INSURANCE PREMIUMS.

§11-13P-1. Legislative finding and purpose.
The Legislature finds that the retention of physicians practicing in this state is in the public interest and promotes the general welfare of the people of this state. The Legislature further finds that the promotion of stable and affordable medical malpractice liability insurance premium rates will induce retention of physicians practicing in this state.
In order to effectively decrease the cost of medical liability insurance premiums paid in this state on physicians' services, there is hereby provided a tax credit for certain medical liability insurance premiums paid.
§11-13P-2. Definitions.
(a) General. - When used in this article, or in the administration of this article, terms defined in subsection (b) of this section have the meanings ascribed to them by this section, unless a different meaning is clearly required by the context in which the term is used.
(b) Terms defined. -
(1)"Adjusted annual medical liability premium" means statewide average of medical liability insurance premiums by specialty and sub-specialty groups directly paid by the eligible taxpayer during the taxable year to cover physicians' services performed during the year reduced by the sum of ten thousand dollars per physician covered by the medical liability insurance policy or policies for which the premiums are paid.
(2) "Eligible taxpayer" means any person subject to tax under section sixteen, article twenty-seven of this chapter or a physician who is a partner, member, shareholder or employee of an eligible taxpayer.
(3) "Person" means and includes any natural person, corporation, limited liability company, trust or partnership.
(4) "Physicians' services" means health care providers services taxable under section sixteen, article twenty-seven of this chapter performed in this state by physicians licensed by the state board of medicine or the state board of osteopathic medicine.
(5) "Statewide average medical liability insurance premiums" are the average of premiums for each specialty and sub-specialty group as determined by the state insurance commission.
§11-13P-3. Eligibility for tax credits; creation of the credit.
There shall be allowed to every eligible taxpayer a credit against the taxes imposed by article twenty-one of this chapter and against the taxes payable under section sixteen, article twenty- seven of this chapter. The amount of this credit shall be determined and applied as provided in this article.
§11-13P-4. Amount of credit allowed.
The amount of annual credit allowable under this article to an eligible taxpayer shall be equal to ten percent of the adjusted annual medical liability insurance.
§11-13P-5. Excess credit forfeited.
If after application of the credit against tax under this article, any credit remains for the taxable year, the amount remaining and not used is forfeited. Unused credit may not be carried back to any prior taxable year and shall not carry forward to any subsequent taxable year.
§11-13P-6. Application of credit; schedules; estimated taxes.
(a) The credit allowed under this article shall be applied against the taxes imposed by article twenty-one of this chapter and against the tax payable under section sixteen, article twenty-seven of this chapter.
(b) To assert this credit against tax, the eligible taxpayer shall prepare and file with its annual tax return filed under article twenty-seven of this chapter, a schedule showing the amount paid for medical liability coverage for the taxable year, the amount of credit allowed under this article, the taxes against which the credit is being applied and other information that the tax commissioner may require. This annual schedule shall set forth the information and be in the form prescribed by the tax commissioner.
(c) An eligible taxpayer may consider the amount of credit allowed under this article when determining the eligible taxpayer's liability under article twenty-one and article twenty-seven of this chapter for periodic payments of estimated tax for the taxable year, in accordance with the procedures and requirements prescribed by the tax commissioner. The annual total tax liability and total tax credit allowed under this article are subject to adjustment and reconciliation pursuant to the filing of the annual schedule required by subsection (b) of this section.
§ 11-13P-7. Computation and application of credit.
(a) Computation of credit resulting from premiums directly paid by individual physicians or by small business corporations, partnerships, and limited liability companies; application of credit.
(1) Application of annual credit allowable. - The annual credit allowable under this article for eligible taxpayers other than payors described in subsection (b) of this section, shall be applied as a credit against the eligible taxpayer's income tax liability imposed by article twenty-one of this chapter and against the eligible taxpayer's state tax liability determined under section sixteen, article twenty-seven of this chapter, and shall be allowed as provided in subdivisions (2) and (3) of this subsection, and in that order.
(2) The annual credit allowable shall first be applied to reduce the eligible taxpayer's annual income tax liability imposed by article twenty-one of this chapter, determined after application of allowable credits and exemptions.
(A) If the eligible taxpayer is an electing small business corporation (as defined in Section 1361 of the United States Internal Revenue Code of 1986, as amended), a partnership, or a limited liability company treated as a partnership for federal income tax purposes, then the credit allowed by this article shall be applied as a credit against the taxes imposed by article twenty- one of this chapter on the income flowing through the eligible taxpayer to shareholders, partners or members of the eligible taxpayer and shall be allocated under this subsection among the eligible taxpayer's shareholders, partners or members in the same manner as profits and losses are allocated for the taxable year. In the case of shareholders, owners, partners or members of the eligible taxpayer that are not subject to the taxes imposed by article twenty-one of this chapter, no credit shall be allowed against tax on income flowing through those shareholders, owners, partners or members to any other person.
(B) No credit shall be allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(3) After application of this credit as provided in subdivision (2) of this subsection, remaining annual credit allowable shall then be applied to reduce the eligible taxpayer's tax liability as determined under section sixteen, article twenty- seven of this chapter, determined after application of all other allowable credits and exemptions.
(b) Computation of credit for premiums directly paid by partners, members or shareholders of partnerships, limited liability companies, or corporations for or on behalf of such organizations; application of credit.
(1) Qualification for credit
.
(A) For purposes of this section the term "eligible taxpayer organization" means a partnership, limited liability company, or corporation that is an eligible taxpayer.
(B) For purposes of this section the term "payor" means a natural person who is a partner, member, shareholder or owner, in whole or in part, of an eligible taxpayer organization and who pays medical liability insurance premiums for or on behalf of the eligible taxpayer organization.
(C) Medical liability insurance premiums paid by a payor (as defined in this section) qualify for tax credit under this article, provided that such payments are made to insure against medical liabilities arising out of or resulting from physicians' services provided by a physician while practicing in service to or under the organizational identity of such eligible taxpayer organization or as an employee of such eligible taxpayer organization, and where such insurance covers the medical liability of:
(i) the eligible taxpayer organization or
(ii) one or more physicians practicing in service to or under the organizational identity of the eligible taxpayer organization or as an employee of the eligible taxpayer organization or
(iii) any combination thereof.
(2) Application of credit by the payor against personal income tax. - The annual credit allowable under this subsection shall first be applied to reduce the payor's annual income tax liability imposed by article twenty-one of this chapter (determined after application of allowable credits and exemptions) on income flowing through the eligible taxpayer organization to the payor that is directly attributable to the business operations of the eligible taxpayer organization. No credit shall be allowed under this section against any employer withholding taxes imposed by article twenty-one of this chapter.
(3) Application of credit by the payor against health care provider tax on physician's services. - After application of this credit as provided in subdivision (2) of this subsection, remaining annual credit allowable shall then be applied to reduce the tax liability directly payable by the payor under section sixteen, article twenty-seven of this chapter, determined after application of all other allowable credits and exemptions.
(4) Application of credit by the eligible taxpayer organization against health care provider tax on physician's services. - After application of this credit as provided in subdivision (3) of this subsection, remaining annual credit shall then be applied to reduce the tax liability directly payable by the eligible taxpayer organization under section sixteen, article twenty-seven of this chapter, determined after application of all other allowable credits and exemptions.
(5) Apportionment among multiple eligible taxpayer organizations. - Where a payor described in subdivision (1) of this subsection pays medical liability insurance premiums for and provides services to or under the organizational identity of two or more eligible taxpayer organizations described in this section or as an employee of two or more such eligible taxpayer organizations, the tax credit shall, for purposes of subdivision (4) of this subsection, be allocated among such eligible taxpayer organizations in proportion to the medical liability insurance premiums paid directly by the payor during the taxable year to cover physicians' services during such year for, or on behalf of, each eligible taxpayer organization. In no event may the total credit claimed by all eligible taxpayers and eligible taxpayer organizations exceed the credit which would be allowable if the payor had paid all such medical liability insurance premiums for or on behalf of one eligible taxpayer organization, and if all physician's services had been performed for, or under the organizational identity of, or by employees of, one eligible taxpayer organization.
§11-13P-8. Legislative rules.
The tax commissioner may propose for promulgation pursuant to the provisions of article three, chapter twenty-nine-a of this code such rules as may be necessary to carry out the purposes of this article.
§11-13P-9. Construction of article; burden of proof.
The provisions of this article shall be reasonably construed. The burden of proof is on the person claiming the credit allowed by this article to establish by clear and convincing evidence that the person is entitled to the amount of credit asserted for the taxable year.
§11-13P-10. Effective date.
This article shall be effective for taxable years beginning after the thirty-first day of December, two thousand one.
§11-13P-11. Termination of tax credit.
No credit shall be allowed under this article for any taxable year ending after the thirty-first day of December, two thousand four.
CHAPTER 29. MISCELLANEOUS BOARDS AND OFFICERS.
ARTICLE 12. STATE INSURANCE.
§29-12-1. Intent and objects.
Recognition is given to the fact that the state of West Virginia owns extensive properties of varied types and descriptions representing the investment of vast sums of money; that the state and its officials, agents and employees engage in many governmental activities and services and incur and undertake numerous governmental responsibilities and obligations; that such properties are subject to losses, damage, destruction, risks and hazards and such activities and responsibilities are subject to liabilities which can and should be covered by a sound and adequate insurance program; and that good business and insurance practices and principles necessitate the centralization of responsibility for the purchase, control and supervision of insurance coverage on all state properties, activities and responsibilities and the cooperation and coordination of all state officials, departments and employees in the development and success of such centralized state insurance program. Wherefore, in order to accomplish these desired ends and objectives, the provisions of this article are hereby enacted into law in response to manifest needs and requirements therefor and in the interest of the establishment and development of an adequate, economical and sound state insurance and bonding service on all state property, activities and responsibilities. Further recognition is given to the need for health care access for the citizens of the state and the critical need for available and affordable medical liability insurance.
§29-12-2. Definitions.

As used in this article, unless the context otherwise clearly requires:
(a) "Board" means the "State state Board board of risk and Insurance of West Virginia" insurance management.
(b) "Claim history debit or surcharge" means a charge added to the premium due to a claims history as determined by the board.
(b)(c) "Claims-made coverage" is coverage for a claim made during the policy period.
(d) "Company" means and includes corporations, associations, partnerships and individuals.
(e) "Extreme risk" means the risk of a provider whose probability of loss is greater than a participant in the high risk medical liability program such that the provision of coverage would create a significant increase in the future liability of the program as determined by criteria established by the board.
(f) "Health care provider" means:
(1) A person licensed by the state board of medicine to practice any branch of medicine in this state;
(2) A person licensed by the state board of osteopathy to practice medicine in this state;
(3) A podiatrist licensed by the state board of medicine;
(4) An optometrist licensed by the state board of optometry;
(5) A pharmacist licensed by the state board of pharmacy;
(6) A registered nurse holding an advanced practice announcement from the state board of professional registered nurses;
(7) A physician's assistant licensed by either the state board of medicine or the state board of osteopathy;
(8) A dentist licensed by the state board of dental examiners;
(9) A physical therapist licensed by the state board of physical therapy;
(10) A professional limited liability company or medical corporation certified by the state board of medicine;
(11) An association, partnership or other entity organized for the purpose of rendering professional services by persons who are health care providers;
(12) A hospital, medical clinic, psychiatric hospital or other medical facility authorized by law to provide professional medical services; or
(13) Such other health care provider as the board may from time to time approve, and for whom an adequate rate can be established.
(14) "High risk medical liability program" is the program for health care providers whose probability of loss is greater than average based on criteria established by the board.
"Health care provider" does not include any provider of professional medical services that has medical liability insurance pursuant to subsection (e), section two, of this chapter.
(c)(g) "Insurance" means all forms of insurance and bonding services available for protection and indemnification of the state and its officials, employees, properties, activities and responsibilities against loss or damage or liability, including fire, marine, casualty, and surety insurance. Insurance includes medical liability insurance for health care providers as defined in this article.
(d)(h) "Insurance company" means all insurers or insurance carriers, including, but not limited to, stock insurance companies, mutual insurance companies, reciprocal and interinsurance exchanges, and all other types of insurers and insurance carriers, including life, accident, health, fidelity, indemnity, casualty, hospitalization and other types and kinds of insurance companies, organizations and associations, but excepting and excluding workers' compensation coverage.
(i) "Prior acts endorsement" is coverage added to a claims- made medical liability insurance policy for acts which occurred prior to the issuance of the claims-made policy currently in effect.
(j) "Professional medical services" means the providing of medical services, including medical treatment.
(e)(k) "State property activities" and "state responsibilities" shall mean and include all operations, boards, commission, works, projects and functions of the state, its properties, officials, agents and employees which, within the scope and in the course of governmental employment, may be subject to liability, loss, damage, risks and hazards recognized to be and normally included within insurance and bond coverages. For purposes of this article, "state property activities" includes ambulances as defined in article sixteen, chapter four-c, section two.
(f)(l) "State property" means all property belonging to the state of West Virginia and any boards or commissions thereof wherever situated and which is the subject of risk or reasonably considered to be subject to loss or damage or liability by any single occurrence of any event insured against. For purposes of this article, "state property" includes ambulances as defined in article sixteen, chapter four-c, section two.
(m) "Reinsurance" is an agreement between insurance companies under which one insurer accepts all or part of the risk or loss of the other insurer.
(n) "Sexual acts" means that sexual conduct which constitutes a criminal or tortious act under the laws of West Virginia;
(o) "Tail coverage" or "extended reporting coverage" is coverage that protects the health care provider against all claims arising from professional services performed while the claims-made policy was in effect and included in the policy but reported after the termination of the policy.
§29-12-3. State board of risk and insurance management; creation, composition, qualifications, and compensation.

(a)(1) There is hereby created the The "state board of insurance of West Virginia" which is continued and reestablished as the state board of risk and insurance management. The board shall be composed of three eleven members appointed by the governor with the advice and consent of the Senate from a list of eligible persons submitted to the governor by the president of the Senate and the speaker of the House of Delegates: Provided, That the list shall include at least three persons for each member to be appointed. Each of the members member shall be a resident of West Virginia, possessed of not less than five years' experience in the business of insurance no more than four members may reside in the same congressional district, no more than one member other than the executive director of the investment management board may reside in the same county, and no more than two six of such members shall may belong to any one the same political party. The three original members of such board shall be appointed for terms of one, two and three years, respectively, and each subsequent appointment shall be for a term of four years.
(2) Any member serving an unexpired term on the effective date of the enactment of this section in the year two thousand one shall continue to serve for the unexpired portion of the term. Initial appointment of the remaining members shall be for the following terms:
Two members shall be appointed for a term ending the thirtieth day of June, two thousand two;
Three members shall be appointed for a term ending the thirtieth day of June, two thousand three;
Three members shall be appointed for a term ending the thirtieth day of June, two thousand four; and
Two members shall be appointed for a term ending the thirtieth day of June, two thousand five.
(3) Except for appointments to fill vacancies, each subsequent appointment shall be for a term ending the thirtieth day of June of the fourth year following the year the preceding term expired.
In the event a vacancy occurs it shall be filled by appointment for the unexpired term. A member whose term has expired shall continue in office until a successor has been duly appointed and qualified. No member of the board may be removed from office by the governor except for official misconduct, incompetency, neglect of duty, or gross immorality.
(4) The board shall consist of the following:
(A) two physicians licensed in this state recommended from a list of six candidates from a specialty area and six candidates from a non-specialty area submitted by the state medical association to the president of the Senate and the speaker of the House of Delegates;
(B) a physician licensed by the state board of osteopathy recommended from a list of six candidates submitted by the state society of osteopathic medicine to the president of the Senate and the speaker of the House of Delegates;
(C) a physician licensed by the state board of medicine from a specialty area representing primary care in a rural area of this state from a list of six candidates submitted by the state academy of family physicians to the president of the Senate and the speaker of the House of Delegates;
(D) a chief executive officer or chief financial officer of a hospital recommended from a list of six submitted by the state hospital association to the president of the Senate and the speaker of the House of Delegates;

(E) two consumers or consumer representatives;
(F) two persons with training or experience in underwriting;
(G) a person with training or experience in insurance industry management; and
(H) the executive director of the investment management board;
(b) The insurance commissioner of West Virginia shall serve as secretary of the board without vote and shall make available to the board the information, facilities and services of the office of the state insurance commissioner.
(c) Each member of the board shall receive the sum of forty dollars per day for each day's services actually performed for such board as well as all necessary expenses incurred in the performance of their duties, not exceeding one hundred days in any one calendar year. The auditor shall pay such compensation and expenses upon requisition certified by the chairman from appropriations provided for such purposes. The executive director shall pay each citizen member of the board the same compensation as is paid to members of the Legislature for their interim duties, as authorized by law, for each day or portion thereof the member is engaged in the discharge of official duties. The citizen members shall be reimbursed his or her actual and necessary expenses incurred in the discharge of official duties, except that the per mile rate to be reimbursed shall be the same rate as authorized for members of the Legislature. All such payments shall be made from the special revenue fund created pursuant to section five-c of this article.
(d) Notwithstanding any provision of this section to the contrary, the board shall be subject to the expiration provisions of section twelve of this chapter.
§29-12-4. Organization, meetings, records and reports of board.

The board shall select one of its members as chairman and shall meet in the office of the insurance commissioner upon call of the chairman. The board shall keep records of all of its proceedings which shall be public and open to inspection,: Provided, That any discussion or consideration of the financial or personal information of an insured may be held by the board in executive session closed to the public, notwithstanding the provisions of article nine-a, chapter six of this code. The board shall adopt a seal and shall exercise and perform the duties prescribed by this article.
The board shall report in writing to the governor, legislative auditor and budget director on or before the thirty-first day of August of each year. Such report shall contain a summary of the board's proceedings during the preceding fiscal year including a detailed and itemized statement and summary of all state insurance procured by the board during such fiscal year.
§29-12-5. Powers and duties of board.
(a) The board shall have general supervision and control over the insurance of all state property, activities and responsibilities, including the acquisition and cancellation thereof; determination of amount and kind of coverage, including, but not limited to, deductible forms of insurance coverage, inspections or examinations relating thereto, reinsurance, and any and all matters, factors and considerations entering into negotiations for advantageous rates on and coverage of all such state property, activities and responsibilities. Any policy of insurance purchased or contracted for by the board shall provide that the insurer shall be barred and estopped from relying upon the constitutional immunity of the state of West Virginia against claims or suits: Provided, That nothing herein shall bar the insurer of political subdivisions from relying upon any statutory immunity granted such political subdivisions against claims or suits. The board may enter into any contracts necessary to the execution of the powers granted to it by this article. It shall endeavor to secure the maximum of protection against loss, damage or liability to state property and on account of state activities and responsibilities by proper and adequate insurance coverage through the introduction and employment of sound and accepted methods of protection and principles of insurance. It is empowered and directed to make a complete survey of all presently owned and subsequently acquired state property subject to insurance coverage by any form of insurance, which survey shall include and reflect inspections, appraisals, exposures, fire hazards, construction, and any other objectives or factors affecting or which might affect the insurance protection and coverage required. It shall keep itself currently informed on new and continuing state activities and responsibilities within the insurance coverage herein contemplated. The board shall work closely in cooperation with the state fire marshal's office in applying the rules of that office insofar as the appropriations and other factors peculiar to state property will permit. The board is given power and authority to make rules governing its functions and operations and the procurement of state insurance, but shall not make or promulgate any rules in contravention of or inconsistent with the laws or rules governing the office of insurance commissioner of West Virginia.
The board is hereby authorized and empowered to negotiate and effect settlement of any and all insurance claims arising on or incident to losses of and damages to state properties, activities and responsibilities hereunder and shall have authority to execute and deliver proper releases of all such claims when settled. The board may adopt rules and procedures for handling, negotiating and settlement of all such claims. All such settlements and releases shall be effected with the knowledge and consent of the attorney general.
(b) If requested by a political subdivision or by a charitable or public service organization, the board is authorized to provide property and liability insurance to the political subdivisions or such organizations to insure their property, activities and responsibilities. Such board is authorized to enter into any necessary contract of insurance to further the intent of this subsection.
The property insurance provided by the board, pursuant to this subsection, may also include insurance on property leased to or loaned to the political subdivision or such organization which is required to be insured under a written agreement.
The cost of this insurance, as determined by the board, shall be paid by the political subdivision or the organization and may include administrative expenses. All funds received by the board, (including, but not limited to, state agency premiums, mine subsidence premiums, and political subdivision premiums) shall be deposited with the West Virginia state board of investments investment management board with the interest income and returns on investment a proper credit to such property insurance trust fund or liability insurance trust fund, as applicable.
Political subdivision as used in this subsection shall have the same meaning as in section three, article twelve-a of this chapter.
Charitable or public service organization as used in this subsection means a bona fide, not for profit, tax-exempt, benevolent, educational, philanthropic, humane, patriotic, civic, religious, eleemosynary, incorporated or unincorporated association or organization or a rescue unit or other similar volunteer community service organization or association, but does not include any nonprofit association or organization, whether incorporated or not, which is organized primarily for the purposes of influencing legislation or supporting or promoting the campaign of any candidate for public office.
(c)(1) The board shall have general supervision and control over the optional medical liability insurance programs providing coverage to health care providers as defined in this article. The board is hereby granted and may exercise all powers necessary or appropriate to carry out and effectuate the purposes of this article.
(2) The board shall:
(A) administer the preferred medical liability program and the high risk medical liability program, and exercise and perform other powers, duties and functions specified in this article;
(B) obtain and implement, at least annually, from an independent outside source, such as a medical liability actuary or a rating organization experienced with the medical liability line of insurance, written rating plans for the preferred medical liability program and high risk medical liability program on which premiums shall be based;
(C) prepare and annually review written underwriting criteria for the preferred medical liability program and the high risk medical liability program. The board may utilize review panels, including but limited to, the same specialty review panels to assist in establishing criteria;
(D) prepare and publish, before each regular legislative session, separate summaries for the preferred medical liability program and high risk medical liability program activity during the preceding fiscal year, each summary to include, but not be limited to, an audited financial statement which shall follow the accounting practices and procedures prescribed by the national association of insurance commissioners accounting practices and procedures manual, as amended, a balance sheet, income statement and cash flow statement, an actuarial opinion addressing adequacy of reserves, the highest and lowest premiums assessed, the number of claims filed with the program by provider type, the number of judgments paid from the program, the number of settlements paid from the program, and the number of dismissals without payment;
(E) determine and annually review the claims history debit or surcharge for the high risk medical liability program;
(F) determine and annually review the criteria for transfer from the preferred medical liability program to the high risk medical liability program;
(G) determine and annually review the extreme risk health care providers to be excluded from the high risk medical liability program;
(H) determine and annually review the extended reporting endorsement credit and vesting terms;
(I) determine and annually review the role of independent agents, the amount of commission to be paid therefore, and agent appointment criteria;
(J) study and annually evaluate the operation of the preferred medical liability program and the high risk medical liability program, and make recommendations to the Legislature, as may be appropriate, to ensure their viability, including but not limited to, recommendations for judicial reform with an associated cost-benefit analysis, recommendations on the feasability and desirability of a plan which would require all health care providers in the state to participate with an associated cost- benefit analysis, recommendations on additional funding of other state run insurance plans with an associated cost-benefit analysis and recommendations on the desirability of ceasing to offer a state plan with an associated analysis of a potential transfer to the private sector with a cost benefit analysis including impact on premiums;
(K) establish a five-year financial plan to ensure an adequate premium base to cover the long-tail nature of the claims- made coverage provided by the preferred medical liability program and the high risk medical liability program. The plan shall be designed to meet the program's estimated total financial requirements, taking into account all revenues projected to be made available to the program, and apportioning necessary costs equitably among participating classes of health care providers.
For these purposes, the board shall:
(i) retain the services of an impartial, professional actuary, with demonstrated experience in analysis of large group malpractice plans, to estimate the total financial requirements of the program for each fiscal year and to review and render written professional opinions as to financial plans proposed by the board. The actuary shall also assist in the development of alternative financing options and perform any other services requested by the board or the executive director. All reasonable fees and expenses for actuarial services shall be paid by the board. Any financial plan or modifications to a financial plan approved or proposed by the board pursuant to this section shall be submitted to and reviewed by the actuary and may not be finally approved and submitted to the governor and to the Legislature without the actuary's written professional opinion that the plan may be reasonably expected to generate sufficient revenues to meet all estimated program and administrative costs, including incurred but unreported claims, for the fiscal year for which the plan is proposed. The actuary's opinion for any fiscal year shall include a requirement for establishment of a reserve fund;
(ii) submit its final, approved five-year financial plan, after obtaining the necessary actuary's opinion, to the governor and to the Legislature no later than the first day of January preceding the fiscal year. The financial plan for a fiscal year becomes effective and shall be implemented by the executive director on the first day of July of the fiscal year. In addition to each final, approved financial plan required under this section, the board shall also simultaneously submit financial statements based on association of insurance commissioners annual statement instructions handbook and shall follow the accounting practices and procedures prescribed by the national association of insurance commissioners accounting practices and procedures manual as amended. The provisions of chapter twenty-nine-a of this code shall not apply to the preparation, approval and implementation of the financial plans required by this section;
(iii) submit to the governor and the Legislature a prospective five-year financial plan beginning on the first day of January, two thousand three, and every year thereafter, for the programs provided for in section five-c of this article. Factors that the board shall consider include, but shall not be limited to, the trends for the program and the industry; claims history, number and category of participants in each program; settlements and claims payments; and judicial results;
(iv) limit premium increases for program participants to a yearly increase, except in the event of an emergency as provided for in this section or in the event a participant, in the board's opinion, has changed his or her area of practice to such an extent that the change increases the participant's claim exposure.
For purposes of this section, "emergency" means that the most recent projections demonstrate that plan expenses will exceed plan revenues by more than five percent in any plan year;
(L) meet on at least a quarterly basis to review implementation of its current financial plan in light of the actual experience of the medical liability programs established in this act. The board shall review actual costs incurred, any revised cost estimates provided by the actuary, expenditures and any other factors affecting the fiscal stability of the plan and may make any additional modifications to the plan necessary to ensure that the total financial requirements of these programs for the current fiscal year are met;
(M) by February of 2002 and each year thereafter, analyze and recommend to the Legislature the most effective method to distribute a subsidy provided by appropriation by the Legislature taking into consideration the following:
(i) access to care particularly in rural areas;
(ii) malpractice premium rates;
(iii) community impact;
and
(iv) other criteria established by the board;
(N) purchase reinsurance, in the amounts as it may from time to time consider appropriate, and the cost thereof shall be considered to be an operating expense of the board;
(O) review and approve, reject or modify rules that are proposed by the executive director to implement, clarify or explain administration of the preferred medical liability program and the high risk medical liability program. Notwithstanding any provisions in this code to the contrary, rules promulgated pursuant to this paragraph are not subject to the provisions of sections nine through sixteen, article three, chapter twenty-nine-a of this code. The board shall follow the remaining provisions of article three and shall hold hearings or receive public comments before promulgating any proposed rule filed in the state register.
Provided, That the initial rules proposed by the executive director and promulgated by the board shall become effective upon approval by the board;
(P) have the authority to enter into settlements or structured settlement agreements whenever settlement is appropriate, to execute and deliver proper releases of all such claims when settled and to own or assign any annuity purchased by the board to a company licensed to do business in the state;
(Q) terminate coverage for nonpayment of premiums upon written notice of the termination forwarded to the health care provider not less than thirty days prior to termination of coverage; and
(R) assign coverage to a third party medical liability insurance carrier with comparable coverage conditions as determined by the board;
(S) notify the insured of nonrenewal by certified mail, return receipt requested, not less than ninety days prior to the expiration of the policy and cancellation by certified mail, not more than thirty days after the reason for cancellation arose or occurred or the insurer learned that it arose or occurred and not less than thirty days prior to the effective cancellation date.
§29-12-5c. Insurance for damages allegedly resulting from obstetric treatment of medicaid patients. Medical liability program for health care providers.

(a) In accordance with the provisions of this article, the state board of risk and insurance management shall provide professional malpractice insurance for all medical practitioners who provide obstetric treatment to patients which is reimbursed or reimbursable by state medicaid funds: Provided, That such medical practitioner has, prior to the alleged negligent act or acts, become a participant in the primary professional malpractice insurance program.
Said primary insurance shall cover any claim, demand, action, suit or judgment by reason of alleged negligence in the course of providing such obstetric treatment which results in injury. Such primary insurance coverage shall be in an amount to be determined by the state board of risk and insurance management, but in no event less than one million dollars for each occurrence.
Such primary insurance coverage shall be mandatory for medical practitioners covered for obstetric treatment by the board of risk and insurance management. Such primary coverage shall be optional for any other medical practitioner who treats medicaid obstetric patients.
The board of risk and insurance management shall establish the criteria for the program for the approval of the insurance commissioner on or before the fifteenth day of June, one thousand nine hundred ninety.
The insurance coverage specified in this subsection shall not apply to any hospital which is the site of the obstetric treatment or to any employee of said hospital, except that a medical practitioner providing the obstetric treatment who is also an employee of the hospital which is the site of the treatment shall be included in the insurance coverage required by this section.
(b) In accordance with the provisions of this article, the state board of risk and insurance management shall provide optional excess professional malpractice insurance for all medical practitioners who provide obstetric treatment to patients which is reimbursed or reimbursable by state medicaid funds: Provided, That such medical practitioner has, prior to the alleged negligent act or acts, become a participant in the excess insurance program. Such excess insurance coverage shall, in no event, exceed three million dollars.
For the purposes of this subsection, excess insurance shall be defined as coverage over and above any other primary or collectible malpractice liability coverage. In no event shall this coverage be primary. Each insured must carry primary insurance of at least one million dollars. Such liability excess malpractice coverage shall be in an amount to be determined by the state board of risk and insurance management, but in no event less than one million dollars for each occurrence.
The board of risk and insurance management shall establish the criteria for an optional program of excess professional malpractice insurance for the approval of the insurance commissioner on or before the fifteenth day of June, one thousand nine hundred ninety.
(c) For the purpose of this section, the definition of medical practitioner shall be limited to physicians, obstetric/gynecological nurse practitioners, certified nurse midwives, nurse anesthetists, and physicians' assistants.
(d) Any premiums assessed and collected under the provisions of this section, or rules and regulations promulgated pursuant to the provisions of this section, shall be placed in a separate insurance pool known as the obstetrical/gynecological liability pool. Said pool is to be administered and maintained by the board of risk and insurance management.
(e) The board of risk and insurance management, with approval of the insurance commissioner, shall have the authority to make needful rules and regulations for the administration of this section, as provided in the State Administrative Procedures Act in chapter twenty-nine-a of this code: Provided, That the board of risk and insurance management, with approval of the insurance commissioner, shall have the authority to promulgate rules and regulations regarding the discontinuance of the program if participation in the program is insufficient to make said program economically feasible.
(a) There is hereby established optional medical liability insurance for health care providers consisting of a preferred medical liability program and a high risk medical liability program. In order to participate in either program, a health care provider must maintain a policy of not excluding patients whose health care coverage is provided pursuant to the West Virginia public employees insurance act, the West Virginia children's health insurance program, West Virginia medicaid, or the West Virginia workers' compensation fund solely based on the fact that the person's health care coverage is provided by any of the aforementioned entities and must annually attend a five hour program, approved by the board, related to risk management;
(b) Each of the programs described in subsection (a) of this section shall provide claims-made coverage together with an optional prior acts endorsement for any covered act or omission resulting in injury or death arising out of the rendering of or the failure to render professional medical services by a health care provider, and for which there is no other policy or guaranty fund protection. The premium for the coverage may be phased in over a five-year maturity schedule depending on the years of prior acts exposure, as more specifically set forth in a written rating manual approved by the board.
(c) Each of the programs described in subsection (a) of this section shall further provide an option to purchase, upon termination, an extended reporting endorsement with respect to any claim arising during the policy period, including any prior acts endorsement, but not made until after said termination. Each participant shall receive an annual credit pursuant to amounts and vesting terms more specifically set forth in a written rating manual approved by the board. At the time of enrollment in the programs, each health care provider shall have the option to select either five-year or ten-year vesting for extended reporting and coverage shall be provided without further charge after the selected term of vesting. If the plan is terminated without a sale or transfer of the plan to another entity, the extended reporting endorsement shall be available to all participants at no additional cost.
(d) Each of the programs described in subsection (a) of this section shall offer limits of one million dollars per claim, including repeated exposure to the same event or series of events, and all derivative claims, and three million dollars in the annual aggregate. Health care providers have the option to purchase higher limits of up to two million dollars per claim, including repeated exposure to the same event or series of events, and all derivative claims, and up to four million dollars in the annual aggregate. In addition, hospitals covered by the plan shall have available limits of three million dollars per claim, including repeated exposure to the same event or series of events, and all derivative claims, and five million dollars in the annual aggregate. Installment payment plans as established in the rating manual shall be available to all participants.
(e) Each of the programs described in subsection (a) of this section shall cover any negligent act or negligent omission resulting in injury or death arising out of the rendering of, or the failure to render, professional medical services, not to exceed the policy limits, except sexual acts as defined in subdivision (m), section two of this article and shall have the authority to exclude other acts or omissions from coverage.
(f) Each of the programs described in subsection (a) of this section shall cover all damages not to exceed the policy limits, except punitive damages, arising from injury or death. The cost of defense is not included in the policy limits.
(g) Each of the programs described in subsection (a) of this section shall provide excess verdict liability in the event that the insured health care provider and the claimant were each willing to settle, within policy limits, but the board declined to do so. Actual malice by the insurer must be established by proving that the insurer actually knew that the claim was proper, but the insurer nonetheless acted willfully, maliciously, and intentionally in failing to settle the claim on behalf of the insured.
(h) Rates for each of the programs described in subsection (a) of this section may not be excessive, inadequate or unfairly discriminatory.
(i) Each of the programs described in subsection (a) shall require, as a basis of participation, that all participants agree, in writing, to the assignment of their policy to a third party providing that the third party provide comparable coverage as determined by the board.
(j) Notwithstanding any other provisions in this article, the premiums for each of the programs described in subsection (a) of this section are subject to premium taxes imposed by article three, chapter thirty-three of this code, and assessments pursuant to the West Virginia insurance guaranty association act set forth in article twenty-six, chapter thirty-three of this code, and any other assessment against premiums.
(k) Neither the state, the board, or any individual member or employee of any of the preceding entities, are liable for any alleged negligence, unfair trade practices, unfair claims settlement practices, bad faith or failure to act in good faith with respect to a claim. No insured, codefendant or codefendant's insurer may be vicariously liable for any alleged negligence, unfair trade practices, unfair claims settlement practices, bad faith or failure to act in good faith by the state, the board, or any individual member or employee of any of the preceding entities.
(l) The Legislature may appropriate moneys from general revenue to supplement the fund. Nothing in this article may be construed to require any appropriation by the Legislature. No person, entity or class may seek any judicial or administrative order or decision the direct or indirect effect of which is to require any appropriation, or increased level of appropriation by the legislative or executive branch of state government as a supplement or subsidy of the fund. No court or administrative agency or board shall have the jurisdiction to consider any such request by any person, entity, or class or the authority to enter any order in violation of this section. No claims or expenses against the fund shall constitute a debt of the state or its general fund.
(m) The board may terminate coverage for nonpayment of premiums upon written notice of the termination forwarded to the health care provider not less than thirty days prior to termination of coverage.
(n) The premiums charged and collected by the board under this article shall be deposited into a special revenue account hereby created in the state treasury to be known as the "medical liability fund," and shall not be part of the general revenue fund of the state. Disbursements from the special revenue fund shall be upon requisition of the executive director and in accordance with the provisions of chapter five-a of this code. Disbursements from this fund shall pay a percentage of operating expenses of the board as appropriated by the Legislature and the board's share of any judgments or settlements of medical malpractice claims. Funds shall be invested with the consolidated fund managed by the West Virginia investment management board and interest income and returns on investments shall be used for purposes of the medical liability program.
(o) For purposes of establishing a pool from which settlements and judgments may be paid, the board is authorized to apply such other reserves that exist and are under their control in an amount not to exceed two million dollars. The board shall reimburse the other reserves for the amount withdrawn by the first day of July, two thousand three.
(p) All payments made in satisfaction of any settlement or judgment shall be in accordance with the procedures established by the board. No settlement or judgment may be paid until there is recorded in the office of the executive director (1) a certified copy of a final judgment against a health care provider insured by either of the medical liability programs created pursuant to this article, or a certified copy of an order approving settlement in a summary proceeding; or (2) appropriate
settlement documentation to include a written settlement determination issued by or on behalf of the board.
(q) In the event of a judgment against a health care provider from which the health care provider or the board wishes to appeal, the board is not liable for more than its share of the judgment and, as to that portion, a supersedeas bond signed by the chairperson of the board, or the chairperson's designee, shall suffice without further surety or other security.
§29-12-5d. Preferred medical liability program.
(a) Participation in the preferred medical liability program shall be (1) determined by underwriting criteria approved by the board and set forth in a written underwriting manual, and (2) subject to rates approved by the board and set forth in a written rating manual. Participation in the preferred medical liability program may not be limited based on specialty, type of practice or geographic location, but may be limited based upon indemnity loss history, number of patient exposures, refusal to participate in risk management/loss control programs or any other grounds the board may approve, as set forth in a written underwriting manual. The board shall periodically review its underwriting manual and make any changes it considers necessary or appropriate.
(b) Qualification for participation in the preferred medical liability program shall be reviewed at each annual renewal with the possibility of transfer to the high risk medical liability program, as set forth in the written underwriting manual approved by the board.
§29-12-5e. High risk medical liability program.
(a) Participation in the high risk medical liability program is subject to higher rates than those established for participants qualifying as preferred and approved by the board, as set forth in a written rating manual. Only extreme risks may be excluded under criteria approved by the board, as set forth in a written underwriting manual approved by the board. The board shall periodically review its underwriting manual and make any changes it deems necessary or appropriate.
(b) The high risk medical liability program shall provide full defense and indemnity up to the coverage limit purchased.
(c) Participants placed in the high risk medical liability program due to prior indemnity payments, but who remain claims-free for a period of three consecutive policy years, and who otherwise are eligible for the preferred program, will then be eligible for transfer to the preferred medical liability program. The board will have the authority to determine whether nominal indemnity payments will be considered for purposes of this subsection.
(d) Two or more indemnity payments in excess of one hundred thousand dollars each during any three consecutive policy years may, at the discretion of the board, result in application of a claims history debit or surcharge approved by the board, as set forth in the written rating manual. Based on actuarial data, additional surcharges may be considered by the board to maintain the fiscal soundness of the program.

(e) If the board determines that due to criteria established by the board, a health care provider presents an extreme risk to the program, the board is authorized by a vote of a majority of members, after notice and an opportunity for hearing in accordance with the provisions of the state administrative procedures act, to refuse or terminate coverage for all claims against the health care provider. The date of termination shall be ninety days after the date of the decision by the board. Upon termination of the liability of the program under this subsection, the board shall notify the licensing or other disciplinary board having jurisdiction over the health care provider of the name of the health care provider and the reason for termination of coverage.
29-12-5f. Executive director.
(a) The board shall employ an executive director for the board of risk and insurance management program created by this article. The executive director shall receive an annual salary of seventy thousand dollars and actual expenses incurred in the performance of official business.
(b) The executive director may employ attorneys and actuaries, all of whom shall be in the classified-exempt class of service under section four, article six, chapter twenty-nine of this code.
(c) The executive director may also employ legal assistants, agents, underwriters, adjusters, claims managers, compliance auditors, and other necessary personnel, all of whom shall be in classified service under section three, article six, chapter twenty-nine of this code.
(d) The executive director may contract for any services the board may from time to time consider appropriate. The provisions of article three, chapter five-a of this code, relating to the purchasing division of the department of administration, do not apply to any contracts or agreements executed by or on behalf of the board or the executive director under the provisions of this article.
(e) Notwithstanding any provision of this code to the contrary, the executive director may acquire legal services as are considered necessary, including representation of the insured or the board before any court or administrative body. Attorneys may be employed either on a salaried basis or on a reasonable fee basis.
§29-12-5g Reporting Requirements
(a) The board shall submit expert witness reports, depositions, interrogatories, admissions or other relevant information to the licensing authority for the health care provider which have been made available to the opposing parties. This information will be made available upon a request by affidavit from the licensing authority establishing that an investigation concerning a specific complaint is in process and that the complaint is specifically related to claims information held by the board.
(b) The board shall submit to the licensing authority of any attorney any order related to a claim filed against a health care provider participating in the medical liability program created in this article wherein the court determines that any complaint was without merit.
(c) The board may not be required to furnish information not in its possession. Reasonable expenses incurred in reproducing the documents, other than expert witness reports or court orders, shall be paid by the licensing authority.
(d) Immunity from suit is hereby granted to any expert witness or judicial officer who makes any finding which is later the subject of a report forwarded to a disciplinary board and, likewise, the state board of risk and insurance management and members and employees thereof are also immune from any claim arising out of reports forwarded to disciplinary boards pursuant to this section.
(e) Any specific claim reserve information is exempt from public disclosure under the freedom of information act set forth in article one, chapter twenty-nine-b of this code.
29-12-13b. Intergovernmental transfer.

Notwithstanding any provisions of sections one, two, or three, article eleven-a, chapter four of this code to the contrary, transfers may be made during any fiscal year by intergovernmental transfer, from the West Virginia tobacco settlement medical trust fund established by those sections in an amount not to exceed ten million dollars pursuant to appropriation by the Legislature.
29-12-13c. Legislative intent.
It is the intent of the Legislature to encourage the creation of a private entity to establish a medical liability insurance company in the state by making available by legislative appropriation up to ten million dollars. On or before the first day of January, 2003, and each year thereafter, the board shall offer, through public bid, the opportunity for a private entity to operate the medical liability insurance programs established in this article as an on-going private business.
§29-12-14. Effective date of act.
This act shall be effective from the date of passage. Any policies written under this article may have an effective date retroactive to the date of passage.

NOTE: §11-13P-1 through 11 is new, therefore, strike throughs and underscoring have been omitted.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new language that would be added.
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