Dr. Robert Menotti, MLMIC president, said the measure positions it to lose $55 million from a $275 million surplus, already diminished by past rate freezes.
"Our solvency is at risk," he said.
Paterson signed the freeze for the second straight year. He said last year that the freeze enabled doctors to keep providing care "without getting suffocated by more back-breaking fiscal burdens," while work continued on long-term solutions. Legislative negotiations are continuing.
Attorney Jeffrey Bloom of the New York Trial Lawyers Association said the administration proposed giving doctors a 6 to 7 percent reduction in premiums, establishing new patient safety provisions, helping the handful of malpractice insurers take excess liability off their books, and re-establishing an assessment so all the state's property and casualty companies would support the malpractice high-risk pool, not just those few writing malpractice insurance.
However, with the collapse of the financial market and troubles at insurance giant AIG, the program bill was put on hold, Bloom said.
Ellen Melchionni, president of the New York State Insurance Association, said Paterson had tried to find solutions. She said the association did not favor a broad assessment on carriers to cover the high-risk pool.
"Operating costs have increased," Melchionni said. "If you're not able to make money on your investments, which usually help companies offer lower rates, at some point something has to give."
With repeated rate freezes by the Pataki administration and again last year, MLMIC has seen its surplus dwindle from $1.5 billion, Menotti said. The 34-year-old mutual company, owned by its policyholders, insures 22,000 physicians, 5,000 physician assistants and nurse practitioners, 80 hospitals and 6,000 dentists.
MLMIC, also responsible for more than half of the doctors in the high-risk pool, requested a 7 percent rate hike this year and 3 percent last year, Menotti said. Its last hike of 14 percent came two years ago.
"We're in the position of a board of doctors voting to raise their own rates," Menotti said.
According to the Medical Society of New York State, its physician members face the "horrendous burden of medical liability premiums," and the system needs change.
Liz Dears, society senior vice president, said many states have caps on pain and suffering awards, like California's $250,000 limit, something New York's trial lawyers have fought for years.
Physicians in specialties like neurosurgery and obstetrics can pay $200,000 a year for malpractice coverage in New York, though consumer advocates note that others pay less than a quarter of that and many are insured by the hospitals where they work.
A recent report from the New York Public Interest Research Group on federal data showed 2,000 to 2,400 malpractice payments in New York each of the past 15 years, with payouts of $743 million in 2008.
The report said less than 7 percent of some 62,270 New York doctors accounted for half the total payouts.
Arthur Levin of the Center for Medical Consumers said less than 2 percent of the entire cost of the medical system is from malpractice. "It's time to have what I would call sort or an independent forensic accounting of the industry's finances and its practices because something doesn't fit."