Jefferson City has come under fire for a story that broke a few weeks ago. Questions pertaining to a conflict of interest and accusations of ethical oversight in regards to Senate Bill 302 have lit up news tickers across the state, compelling the elected inhabitants of the Missouri State Capital, and their constituents, to start looking for answers.
Regulating the Missouri Medical Malpractice Insurance Market – Senate Bill 302
Over the past few months the Missouri State Senate has been working on legislation to more closely regulate the medical malpractice insurance market in Missouri, specifically a type of malpractice insurance company known as a 383. The proposed bill, Senate Bill 302, would have set minimum standards for the 383’s with regards to their surplus accounts, that is to say, a 383 would be required to hold a minimum amount in cash investments at all times in order to ensure payment of medical malpractice claims and adequately defend its doctors. This was a common sense measure designed to protect Missouri’s doctors since medical malpractice insurance claims can cost hundred of thousands of dollars to defend. The bill was constructed from the premise that if a 383 insurance company does not have adequate funds to defend a doctor in court or indemnify a claim, that company simply should not be issuing policies to doctors. The requirements laid out in Bill 302 would have required 383’s to meet minimum standards in order to sell a promise of protection to physicians. Common sense would allow any legislator to understand the importance of ensuring the state’s 383 companies are solvent in order to protect Missouri doctors.
Common Sense Standards to Protect Physicians
The need for Senate Bill 302 is clear in the highly unregulated 383 malpractice insurance market. Currently, 383’s control more than 40% of Missouri’s medical malpractice insurance market. This high market share is due to the important role 383 companies played in rescuing the state from a medical malpractice insurance crisis. During the crisis, 383 companies were were the only type of medical malpractice insurance company able to bring affordable premiums to Missouri’s doctors. Since that time however, some 383’s have flourished and are financially strong while others have been struggling to provide market-standard coverage or maintain an adequate surplus in order to safely pay claims. For example, the 383 with the largest market share in the state has more than $17 million in surplus and is financially strong enough to defend, and if need be, pay any claim brought against its doctors. Another 383, MoDocs, had only $7,935 in surplus to pay claims at the beginning of this year; however it has reportedly raised its surplus to roughly $18 thousand since then. Since many malpractice claims cost an insurance company hundreds of thousands of dollars, legislators saw a need to step in and further regulate the 383’s surplus. This was done in an effort to protect Missouri’s doctors from situations where, in the opinion of many Missouri legislators, uninformed doctors where unknowingly taking excess risk with their coverage by accepting promises in the form of insurance policies from companies that may not have been monetarily able to fulfill their obligations.
As reported by many sources through the course of the week, Senator Rob Schaaf encouraged Senate Leader Rob Mayer to assign Bill 302 to a committee Schaaf chairs. The bill sat without action for months and died within Schaaf’s committee without being brought before the Senate for a vote. The problem? Schaaf is the owner of MoDocs, a 383 company that would have been regulated by the legislation, and if enacted into law, Bill 302 would have forced Schaaf to raise nearly $600,000 in capital to meet the minimum surplus requirements. It would have also required Schaaf to rewrite the language in MoDoc’s policies to be more favorable towards doctors. These changes were common sense steps, proposed by Schaaf’s colleagues in the Senate in order to ensure Missouri’s doctors were treated fairly and sufficiently protected.
The fact that Schaaf had a financial interest in the failure of the bill while standing to lose big if it was accepted, raises questions about the obvious conflict of interest. The use of common sense and ethical prowess would suggest that a Senator in this position would recuse himself from direct participation in such a matter. Due to his decision to directly participate in Bill 302 and the allegation he demanded a degree of additional oversight by having the bill assigned to the committee he chairs, Schaaf has been the target of a tremendous volley of criticism from his peers, constituents, the media and others familiar with the bill.
The True Culprit in Jefferson City
However, it appears the true culprit has escaped relatively unscathed. While legislation should be created with input by experts who have knowledge relevant to a proposed law, the Missouri government seems to have very loose guidelines as to whether or not these experts can be the legislators themselves. What’s more, there seems to be no legal issue if Missouri’s legislators propose, postpone or participate in bills in which they have a direct financial interest.
Take for example, the Wind Capital Group which is owned by Tom Carnahan. It produces alternative, clean energy through the use of wind turbines. Tom Carnahan is the brother of State Representative Russ Carnahan and Missouri Secretary of State, Robin Carnahan. Missouri readied stimulus money to boost the economy and build infrastructure after the recession in 2008. A stimulus package of $107 million was proposed for the Wind Capital Group. The legislation was publicly supported by Robin Carnahan and voted for by Tom Carnahan. The stimulus was approved. Wind Capital Group is a good company providing a good product and it very well may have deserved the stimulus money. But the question remains, is it ethical for a legislator, elected to do the work of his constituents, to vote for a bill that would send more than $100 million of taxpayer money directly to someone in his immediate family? Again, a little ethical consideration would have suggested that Rep Carnahan should have removed himself from the vote.
The Need for Legislation for the Legislators
The simple fact remains; a shortfall in the legislation for our legislators exists. There needs to be a clear set of guidelines baring Missouri’s elected officials from making a profit or avoiding a loss by voting for, voting against, holding up, or proposing bills with a direct and substantial financial impact on themselves and their immediate families, especially when that positive financial gain for the legislator or their family comes at the expense of someone else. This would ensure the integrity of bills meant to benefit the citizens of the state of Missouri.
In the case of Senator Rob Schaaf and Bill 302, his personal financial benefit from the failure of the bill came at the expense of his physician policy holders while disregarding the concern of the legislators who saw a problem in the market. Additionally, the failure of Bill 302 has worried the financially secure 383 companies who are concerned about the irresponsibility of insolvent companies sharing the market and endangering physician’s practices and financial integrities. Bill 302 is dead, but there will be more bills directly affecting our legislators in the future. Jefferson City’s legislators would be wise to propose a bill for themselves, requiring abstinence from direct control or voting participation in bills where said legislators stand to personally gain or lose money, status or competitive advantage at the expense of taxpayers, constituents or even medical malpractice insurance policy holders.
