In a move that could provide relief for many doctors, New Jersey's Department of Banking and Insurance approved a relatively rare kind of malpractice insurance plan called a reciprocal exchange. The New Jersey Physicians United Reciprocal Exchange, or NJ PURE, hopes to meet additional state requirements and begin operating before Jan. 1, 2003, when about half the physicians in the state renew their malpractice policies. Under a reciprocal exchange plan, policyholders with similar needs and risks pool their premiums and share a combined risk. Each member's liability is limited to their premium. To satisfy state regulations, NJ PURE must sign up at least 200 physicians and collect down payments on premiums, which will be held in an interest-bearing trust until the company opens for business. The company expects to sign up only low-risk physicians, rejecting those who have lost several lawsuits or have multiple pending malpractice claims.
Reciprocal exchanges are not new in the state. MIIX Insurance Co., which covers more than 15,000 physicians, was created as a reciprocal exchange during the last medical malpractice insurance crisis in the mid-1970s. It developed serious financial troubles after expanding and becoming a publicly traded company. After a fourth-quarter operating loss of $162.8 million, MIIX established a plan this summer to pay off all debt and recreate the company as a reciprocal exchange in which policyholders are the owners. -- by Michael Romano