(b) Consolidating and simplifying our organizational structure. We contributed our life insurance subsidiary (Maxicare Life & Health) to the Indiana Plan, and the Indiana Plan was contributed to the California Plan. This reorganization simplified our corporate structure and has resulted in a strengthening of our regulatory capital.
Prior to December 31, 2000, MHP was the direct owner of Maxicare California, Maxicare Indiana and MLH. On December 31, 2000 as part of general reorganization and simplification of its corporate structure, MHP contributed the capital stock of MLH to Maxicare Indiana and contributed the capital stock of Maxicare Indiana to Maxicare California. The above mentioned corporate reorganization and simplification will also strengthen the Company's regulatory capital. We filed notice of the reorganization with the California Department of Managed Health Care and the Indiana Department of Insurance. Although we believe the reorganization met with all applicable regulatory requirements, both the California and Indiana authorities have the right to modify or reject the reorganization, and the California department has advised us that it is currently reviewing our filing. If either department modifies or rejects our reorganization, we may not be able to meet the minimum capital requirements without obtaining substantial additional capital, which may not be available to us either on reasonable terms or in a timely manner, if at all. If we do not meet the minimum capital requirements of either state, we may not be able to conduct business in that state.
The Company experienced significant operating losses in 2000 and in the three prior years. The losses have reduced the Company's equity position as of December 31, 2000. Further, the Company's current ratio is approximately 1:1 as of December 31, 2000. In order to address the operating losses incurred in 2000 and prior years, management of the Company has undertaken significant changes to its business and operations including: (a) outsourcing its information systems and upgrading system capabilities; (b) enhancing its claims processing which the Company believes will reduce claims payment errors; (c) establishment of a claims recovery unit to collect on overpayments and duplicate payments; (d) strengthening its underwriting processes; (e) discontinuing certain unprofitable lines of businesses; and (f) increasing premiums in its PPO and commercial lines as of January 1, 2001.
Effective August 1, 2000 the Company obtained insurance for medical malpractice claims. Prior to August 1, 2000 the Company was self-insured for such claims. Effective June 1, 2000 the Company obtained reinsurance for medical claims in excess of $500,000 per member with an aggregate limit per member of $1.0 million per year and $2.0 million per lifetime for its commercial membership. Prior to June 1, 2000 the Company was self-insured for such claims. MLH and Health Care Assurance Company Limited, a wholly owned subsidiary of MHP, provide various reinsurance and medical malpractice coverage to the affiliated HMOs of the Company.
In 1998 the Company recorded a $10.0 million charge for anticipated continuing losses primarily related to contracts in Illinois and the Carolinas for which the anticipated future health care costs and associated maintenance costs exceed the related premiums, and certain other costs associated with the divestiture of these health plans. Also in 1998 the Company recorded a $6.5 million charge composed of (1) a $2.5 million increase to the reserve for loss contracts and divestiture costs related to the divestiture of the Carolina's commercial line of business extending beyond December 1998 through March 1999 and higher than anticipated costs in the non-continuing health plans, (2) a $2.0 million charge for litigation substantially related to the Company's former Illinois health plan and (3) a $2.0 million charge for provider insolvency/ impairment related to certain of the Company's capitated provider arrangements. For the year ended December 31, 1998, the Company applied against the $12.5 million reserve for loss contracts and divestiture costs approximately $8.3 million of health care costs and $3.7 million of associated maintenance and divestiture costs which exceeded the related premiums.