Utah's largest medical malpractice insurer is being sold to a company in Minnesota in an estimated $142 million deal that will mean a windfall for its policyholders, thousands of doctors in Utah, Idaho, Wyoming and Montana.
The acquisition of Utah Medical Insurance Association (UMIA) by Midwest Medical Insurance Company (MMIC) was cleared by regulators last week.
The merger, announced in February, now needs only the approval of policyholders and it is expected to close at the end of June.
UMIA was formed 35 years ago by a group of Utah doctors in need of affordable malpractice coverage. Under the merger, it will become a wholly-owned subsidiary of MMIC, which is also physician-owned, and covers 10 southern and southeastern states.
The merger will allow MMIC to expand its footprint into western states, said the Minnesota-based company's President and CEO Bill McDonough last month at a public hearing on the sale. And it will financially strengthen UMIA, he said.
UMIA still claims 50 percent of the Utah market, according to the Utah Department of Insurance, but has lost some of its customer base as independent physicians hire on with large hospitals.
MMIC sells coverage for hospitals and long term care centers, not just policies for solo doctors, according to its web site.
Regulators in Oregon, where UMIA became licensed in order to facilitate the sale, approved the merger, noting it would not hurt competition or create a monopoly.
Because UMIA is physician-owned, each of its 2,900 current policyholders including 2,000 doctors in Utah will receive a share of the sale price, according to Martin J. Oslowski, UMIA president and CEO.
An initial $20 million payment will be distributed within 10 days of the closing date. The rest will be doled out over five years as the final sale price adjusts to account for swings in reserves, Oslowski said at last month's hearing.
If the proceeds were divided evenly, and the price stayed close to $142 million, that would mean $49,000 per policyholder. But it's more complicated than that. Policyholders will be paid based on how much they contributed in insurance premiums between 2008 and 2012.
Coverage will be continued, but doctors will be free to shop around.
A earlier proposed merger between UMIA and The Doctor's Company was rejected by Utah's Insurance Department because it would have induced UMIA members to keep their policies for five years.
Malpractice insurance sale, by the numbers
50 percent • Utah Medical Insurance Association's current share of the Utah market
$142 million • Estimated size of acquisition by MAG Mutual Insurance Co.
10 states • MMIC's current footprint
2,900 • UMIA shareholders who will receive a share of the sales price