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State Patient Compensation Funds: What You Need to Know

November 21, 2022

State Patient Compensation Funds: What You Need to Know

A patient compensation fund, as the name suggests, helps to ensure reasonable compensation for patients who have been injured due to medical negligence. These funds were legislative responses to the medical malpractice crisis of the 1970s that saw several cascading factors threatening instability in the medical liability market. As state tort laws became more favorable to plaintiffs, plaintiff attorneys recognized the opportunities presented by medical malpractice lawsuits, especially in an environment of increasingly complex medicine.1

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These factors contributed to a rapidly diminishing market for providers seeking liability insurance in the 1970s which, at the time, was sold as a separate line by traditional commercial carriers. Out of this crisis came the legislative response of patient compensation funds and new companies specializing in medical malpractice insurance — the industry we now know as medical professional liability insurance.1

The compensation available under a patient compensation fund is in excess of underlying coverage obtained by eligible healthcare providers from their liability insurers. The funds also generally limit a provider’s liability to a specific amount. At the time the funds were created, they were seen as an effective way of increasing accessibility to medical malpractice insurance at a reasonable cost.2

Which States Operate Patient Compensation Funds?

Seven states currently operate patient compensation funds. These funds are financed by surcharges on the underlying coverage and vary by state on details like provider eligibility, coverage details, surcharges, residency requirements, requirements for underlying coverage, and more. The table below provides a general state-by-state summary of the key details of these funds.

The information here is for general understanding only. Visit the fund website for specific details about a fund.

Fund Website

Indiana Patient’s Compensation Fund

Kansas Health Care Stabilization Fund

Louisiana Patient’s Compensation Fund

Nebraska Excess Liability Fund

Mandatory or Voluntary?

Voluntary for most entities and individuals practicing in IN (residents and non-residents)

Mandatory for most healthcare providers practicing in KS (residents and non-residents)

Voluntary for providers practicing in LA (residents and non-residents)

Voluntary for providers practicing in NE (residents and non-residents)

Fund Limits*

Total cap of $1,650,000 for act of malpractice between 6/30/17 and 7/1/19; $1,800,000 thereafter

Provider capped at $400,000 from 6/30/17 to 7/1/19; $500,000 thereafter

Multiple options available

Total cap on damages is $500,000 (exclusive of medical costs, which are paid by the fund); provider only liable for $100,000

$2,250,000 total cap

Coverage Type

Claims Made or Occurrence

Claims Made

Claims Made or Occurrence

Claims Made or Occurrence based on underlying coverage

Does Fund coverage extend outside of the Fund state?

No

If KS resident, yes. Coverage is worldwide.

If contributing as a non-resident, coverage is limited to KS.

No

No

Who submits information to the Fund?

Carrier

Carrier

Carrier

Insured

 

Fund Website

New Mexico Patient’s Compensation Fund

Pennsylvania Medical Care Availability and Reduction of Error Fund

Wisconsin Injured Patients and Families Compensation Fund

Mandatory or Voluntary?

Voluntary for covered providers practicing in NM (residents and non-residents)

Mandatory for most providers practicing in PA (residents and non-residents)

Mandatory for most providers who practice in WI >240 hrs/yr and most providers who are WI residents but practice in MI; voluntary for other providers

Fund Limits*

$750,000 total cap for individual providers who belong to the fund, except for medical care and punitive damages; Provider capped at $250,000

$500,000/$1,500,000 for individual providers

No limit. The Fund indemnifies its participants for any amount over $1,000,000

Coverage Type

Occurrence

Underlying coverage may be claims made or occurrence, but MCARE coverage is occurrence only.

Occurrence

Does Fund coverage extend outside of the Fund state?

No

Yes, it follows the physician if they have incidental coverage in another state covered by their PA policy.

Yes, if the primary practice is in WI.

Who submits information to the Fund?

Insured

Carrier

Carrier

 

* Limits are in excess of underlying coverage

South Carolina has also had a Patients’ Compensation Fund (PCF), however, effective January 1, 2020, the South Carolina PCF and the South Carolina Medical Malpractice Joint Underwriting Association (JUA) were consolidated into the South Carolina Medical Malpractice Association (SCMMA). As a result, the South Carolina PCF fund is winding down, with the intent for the MMA to evolve into the market of last resort for providers and entities.

References

1. Susan Beach, Eric R. Anderson. “MPL Association—A Rich History of Supporting Insurers and Medical Professionals.” Inside Medical Liability. First Quarter 2022.

2. Elizabeth D. Schrero. “Patient Compensation Funds: Legislative Responses to the Medical Malpractice Crisis.” American Journal of Law & Medicine. 1979 Summer;5(2):175-95.

Filed under: Regulation & Compliance

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