Wisconsin to restore money raided from liability fund

Wisconsin state officials have until June 30, 2012, to repay more than $200 million that was raided from the state's medical liability compensation fund four years ago, according to a law enacted June 15.

The legislation complies with a decision by the state Supreme Court, which in 2010 found the financial transfer unconstitutional. The high court ordered the state to repay the fund, but it did not set a deadline. Since the Supreme Court's ruling, state representatives have been working with medical society officials to reach an agreement on the amount of interest and cost earnings incurred on the debt.

The legislation sends a clear message that Wisconsin lawmakers are proactive and dedicated to repaying the debt, said Ruth Heitz, general counsel for the Wisconsin Medical Society.

"We're very pleased with the state's commitment to making sure the fund is repaid, and we will continue our efforts" to resolve the issue, she said.

Wisconsin legislators transferred money from the Injured Patients and Families Compensation Fund in 2007, saying the money was needed to pay for other state health care programs. The medical society argued the transfer amounted to an illegal tax on doctors.

A Dane County trial court sided with the state in 2008, ruling physicians pay mandatory fees to the fund for medical liability insurance coverage -- a benefit they already receive -- but have no other right to the money. The medical society appealed the ruling and appellate judges, without addressing the merits, sent the case directly to the high court.

In its July 20, 2010, opinion, the Supreme Court of Wisconsin said health professionals have a "constitutionally protected property interest" in the fund and that several corresponding rights follow, including "a right to the security of integrity of the fund." Any transfer of money from the fund for an improper purpose infringes upon these rights, the court said.

In May 2011, Wisconsin lawmakers introduced legislation that included a mandate to repay the fund.

"We must do the prudent thing and take care of our responsibilities like Wisconsin families do each and every day," state Rep. Tom Larson, who co-sponsored the bill, said in a statement.

Heitz said the medical society and state representatives are close to reaching a final agreement on the total amount to be repaid.

Similar fund disputes

A long court dispute in New Hampshire over how that state can use its medical liability compensation fund also has resulted in legislation that favors physicians. New Hampshire lawmakers in June approved a bill preventing the state from making any future withdrawals or transfers from the Medical Malpractice Joint Underwriting Assn.

The New Hampshire Supreme Court on Jan. 28, 2010, found unconstitutional a state law authorizing the transfer of $110 million from the liability fund to the state's general fund. The money was earmarked for expanding state health care programs for underserved populations.

The state created the JUA in 1975 as an alternative source of affordable liability insurance, which is funded through the annual premiums physicians, hospitals and other health care entities pay to purchase coverage.

The fund remains intact because the state's attempt to take the money was blocked before the dollars were diverted, said Janet Monahan, deputy executive vice president of the New Hampshire Medical Society.

The recent legislation notes that the JUA has amassed more funds through premium payments than "is necessary to sustain its operations," and says return premiums must be issued to all policyholders who contributed to the surplus.

However, in a June 16 statement, New Hampshire Gov. John Lynch said he would not sign the bill because he did not believe its outcome would benefit doctors. Directing all excess surplus to be distributed may "undermine the future viability of the [JUA] and its ability to continue to provide medical malpractice insurance at reasonable rates to doctors who need this insurance," he said. Lynch indicated he would allow the bill to become law without his signature.

Meanwhile, a court battle in Pennsylvania continues over whether the state must repay money taken from its medical liability compensation fund.

In October 2009, state lawmakers approved the transfer from the liability pools of what they contended were excess dollars in order to finance other state needs. The move prompted separate lawsuits by the Pennsylvania Medical Society and the state's hospital industry.

In April 2010, a trial court found that physicians were entitled to an estimated $600 million in tax money set aside to help abate doctors' liability premium payments and an additional $100 million physicians paid into a separate state fund for liability coverage. The court ordered the return of the funds, and the state appealed the decision.

The case is now before the state Supreme Court.