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Insurance superintendent asks for big PCF adjustment, warns hospitals leaving fund could threaten solvency
Summary
Superintendent Alice Kane told the committee OSI will seek a large adjustment to reflect realistic patient compensation fund settlements and outlined a $10 million wildfire mitigation pilot; the chief actuary estimated hospitals' pre‑2027 liability at about $260 million and flagged solvency risk if adverse claims exceed projections.
Alice Kane, superintendent of insurance, told the Legislative Finance Committee that the Office of Superintendent of Insurance (OSI) is requesting a FY27 budget that more closely matches average settlement costs and seeks recurring funding for cybersecurity and staff needed to administer claims.
Addressing a long‑running funding mismatch, Kane said OSI is asking for a large one‑time correction to bring the Patient Compensation Fund (PCF) in line with historical settlement experience. "What we're trying to really reflect is what really happened every year," she said, explaining OSI's ask to increase PCF budgeting by roughly $74,200,000 so the agency’s figures reflect a three‑year settlement average of about $103,000,000.
Actuarial concerns and hospital exit: Christian Myers, OSI’s chief actuary, told the committee that hospitals currently account for most PCF revenue and that hospitals’ aggregated liabilities for events occurring before the hospitals’ planned exit from the PCF at the end of 2026 are estimated at about $260,000,000, with a large uncertainty range. "If the claims are paid exactly as the actuary estimates, then the PCF is projected to be solvent," Myers said, but he warned that an adverse swing (he cited a possible ±$50 million range) could jeopardize solvency and require legislative action to plug gaps.
Administration and vendor transitions: Kane said the third‑party administrator contract (Integreon) has not been renewed and that OSI was unable to find a replacement TPA in a second RFP. To maintain claims processing, OSI proposed bringing some claims adjuster capacity in‑house, asking for funds to hire four adjusters and an attorney (about $649,000) and to continue some cybersecurity and accreditation costs.
Wildfire mitigation pilot: Kane also highlighted a $10 million special appropriation for wildfire mitigation—described as the largest such appropriation in the country—earmarked for a pilot in Otero County to harden about 28 homes at approximately $7,000 per home and to train staff in IBHS mitigation standards.
Why it matters: the PCF is a central mechanism for medical malpractice settlements in New Mexico. Kane and the actuary sketched a scenario in which hospitals leaving the fund reduce revenue sharply, while claim payments materialize over several years, creating a timing mismatch that complicates solvency planning. Committee members pressed for more actuarial detail and asked for follow‑up materials on enrollment, third‑party administration and how OSI will manage transition risks.
Next steps: OSI will provide further actuarial detail and documentation of PCF enrollment and projected cash flows; lawmakers signaled they may scrutinize both the PCF assumptions and the broader market dynamics that affect access to malpractice coverage in the state.
