Profitable “NonProfit” Insurance Companies: Hidden Factors in The Rising Cost of Healthcare

Lawsuit reform is a highly controversial topic at the moment. There are many movements to try to cap medical malpractice awards since people blame doctors’ insurance costs as a reason for expensive healthcare. However, what people often don’t see is that the doctors’ insurance which is reserved for medical malpractice awards actually generates a nine-digit profit for these “non-profit” insurance companies. This significant surplus begs the question: so is the rising cost of healthcare really benefitting victims of medical malpractice or the administration?

In the early 1970s, the Pennsylvania Legislature established a non-profit medical malpractice insurance company that would serve as a carrier for those physicians in the Commonwealth who could not find insurance anywhere else.  While the obvious question might be “why couldn’t these doctors find insurance anywhere else?”, the legislature nonetheless saw fit to utilize tax dollars to establish this insurance company of last resort.  The Professional Liability Joint Underwriting Association (JUA) was created as an independent nonprofit entity under IRS Code 501(c)(3), which is typically reserved for charitable or non-profit organizations that are not part of governments.

Remarkably, this nonprofit insurer of last resort has become quite profitable.  Between 2004 and today, its net assets have risen fivefold, and currently, the JUA is sitting on surplus assets of approximately $268 million.

Given the fact that the entity was created in an effort to provide low-cost insurance to doctors who were having difficulty obtaining coverage in the open market, perhaps it’s time the Legislature revisited the entity it created some 40 years ago, as the Commonwealth could use a spare $268 million to offset other costs in the healthcare system.