A medical malpractice insurer filed a lawsuit against Pennsylvania state government over its financial demand and threat.
Last month, Gov. Tom Wolf signed a budget-related legislation to seize $200 million from the Pennsylvania Professional Liability Joint Underwriting Association (JUA). In addition, the bill threatens to shut down the medical malpractice insurer if it refuses to hand over the money.
In 1976, Pennsylvania created JUA as a private association. It is responsible for helping physicians and other health care providers obtain mandatory medical liability insurance. The association does not receive funding or is not run by the State government. In other words, JUA’s assets are private.
In its complaint, JUA is asking the court to stop the Pennsylvania state government’s plan to sequester its money. The association argued that losing $200 million will “seriously imperil” its operations. It will negatively impact its ability to fulfill insurance coverage obligations to policyholders.
According to JUA, complying with the State’s demand means it will be forced to shoulder transaction costs including brokerage fees. It will also suffer investment losses. It will not have enough money to satisfy its policies.
Pennsylvania AG says State has authority to dissolve JUA
In response to JUA’s complaint, the Pennsylvania Attorney General’s Office said the State government created the association. Therefore, it has the authority to dissolve it.
Additionally, the State lawyers argued that the association has excessive reserves and do not belong to it.
In its court filings, JUA argued that its reserves came from premiums and the Stare has no right to take it. The association also emphasized that no regulator including the State Department of Insurance considered its reserves to be excessive. It has $268 million surplus as of December 31.
In July, JUA President Susan Sersha said, “Seizure of the JUA’s asset could potentially limit the health care services available in Pennsylvania and leave injured patients with no recourse should a health care provider be found liable for their injuries.
The Pennsylvania state government wants to obtain $200 million from JUA to help close a $2.2 billion budget deficit. In June, the State Legislature approved a $32 billion state budget. However, it needs to find ways to generate revenues to fund the state budget.