The Truth About the Medical Malpractice Crisis

THE INSURANCE INDUSTRY HAS BEEN GUILTY OF PRICE-GOUGING DOCTORS

If claimants are having such a hard time winning even valid claims, one has to wonder why insurance premiums are so high for good doctors. The truth is that the insurance companies have been guilty of overcharging the medical community on premium rates. A recent study has revealed that the medical community has been charged unreasonably high malpractice insurance premium rates. Americans for Insurance Reform (AIR) released a new study Stable Losses/Unstable Rates 2007 that examines fresh insurance industry data to determine what caused the most recent medical malpractice insurance crisis for doctors. The study by AIR, a coalition of over 100 consumer and public interest groups representing more than 50 million people, found that the insurance crisis that hit doctors between 2001 and 2004 was not caused by claims, payouts, or legal system excesses as the insurance industry claimed. Instead, the following information - from the industry's own data - tells a much different story:

• Inflation-adjusted payouts per doctor not only failed to increase between 2001 and 2004, a time when doctors' premiums skyrocketed, but they have been stable or falling throughout this entire decade.
• Medical malpractice insurance premiums rose much faster in the early years of those decade than was justified by insurance payouts.
• At no time were recent increases in premiums connected to actual payouts. Rather, they reflected the well-known cyclical phenomenon called a "hard" market. Property/casualty insurance industry "hard" markets have occurred three times in the past 30 years.

During this time period, medical malpractice insurers vastly (and unnecessarily) increased reserves (used for future claims) despite no increase in payouts or any trend suggesting large future payouts. The reserve increases in the years 2001 and 2004 could have accounted for 60% of the price increases witnessed by doctors during the period.

Dr. J. Robert Hunter, Director of Insurance for the Consumer Federation of America, was the author of the study. Dr. Hunter, a former federal Insurance Administrator and Texas Insurance Commissioner, observed:

This report is proof positive that the huge medical malpractice insurance rate increases between 2000 and 2003 were not related to a jump in claims. Rather, as in the mid-1970's and mid-1980's, they were simply the result of insurance industry economics, supplemented by insurer hype intended to divert attention away from the mismanagement by insurers that caused the crisis.

The insurance industry - and the tort reformers - for years have used the medical community effectively in the joint effort of increasing insurance rates and selling the tort reform story. This report shows that the real reasons medical malpractice insurance rates rose so dramatically for doctors during this decade was actually market forces and dropping interest rates. Clearly, it wasn't because of a sudden increase in medical malpractice jury awards or payouts. These periodic insurance crisis will continue to occur unless lawmakers take steps to reform the insurance industry. State lawmakers must strengthen state insurance regulatory laws, and Congress must repeal the decade-old McCarran Ferguson Act, which exempts the insurance industry from anti-trust laws. It will be interesting to see what happens. The fully study can be found at: http://insurancereform.org

[The Jere Beasley Report]
[May 2007 - Page 10]