NAIC Hears Conflicting Views On Med Mal Crisis

Michael Ha

NU Online News Service, March 10, 11:20 a.m. EST,Atlanta?At its spring meeting in Atlanta, the NationalAssociation of Insurance Commissioners held a public hearing on theavailability and affordability issues regarding medical malpracticeinsurance--a topic that has gotten a lot of attention recently inthe wake of doctors' job actions and rallies around the nation.

But participants at the Saturday, March 8, hearing offereddeeply conflicting diagnoses on the current crisis.

Representing a physician's view was Dr. Donald J. Palmisano,president-elect of the Chicago-based American Medical Association,who argued that the current med mal crisis is only gettingworse.

On the other side of the debate, attorney Jay Angoff, arepresentative of the American Trial Lawyers Association, disputedthe severity of crisis by arguing that the average premium paid bydoctors across several specialties is only a small portion of theirincome.

Dr. Palmisano said the AMA has identified 18 states--includingFlorida, Illinois, New Jersey, New York, Texas andPennsylvania--that are experiencing a full-blown crisis.Additionally, 26 more states have the potential to join thislist.

Currently, only six states--California, Colorado, New Mexico,Louisiana, Wisconsin and Indiana--are considered stable by theassociation, he said.

In Pennsylvania's case, premiums of major private insurancecarriers rose between 80 percent and nearly 150 percent between1997 and 2001. In 2002, the rise in filed premiums ranged from 40percent to more than 50 percent, and similar increases were filedagain this year, Dr. Palmisano noted.

In January, Abington Memorial Hospital in Pennsylvania had totemporarily suspend its trauma center because there weren't enoughon-call surgeons who could afford professional liability insurance,he recalled. Furthermore, in the past five years, eight companieshave stopped offering med mal insurance in the state, with only twocarriers now remaining.

"Many physicians have no choice but to relocate to other stateswhere premiums are less or limit the range of services they offer,or withdraw from their profession altogether. Escalating insurancepremiums, such as the $210,000 premium for ob/gyns in Florida,means it is no longer economical for many physicians to purchaseinsurance," Dr. Palmisano argued.

Offering a different set of numbers, Mr. Angoff said that in2001, the median income for primary care physicians was more than$149,000, a 9.7 percent jump from 1997. Specialists, he said, had amedian take of about $263,000, which represents some 20 percentincrease from the 1997 figure--and "much more than what stateregulators make."

Dr. Palmisano said the source of the crisis lies not inincompetent physicians, but rather in large jury verdicts withexorbitant amounts of non-economic damages in med mal cases.

"As a result of these large jury verdicts, insurance companiesare forced to raise their premiums, otherwise face insolvency. Webelieve the litigation system is creating this crisis. The currentsystem is critically flawed."

"Now is the time for a uniform federal-level regulation for tortreform, including capping non-economic damages in jury awards," hesaid, going on to give an analysis of the positive impacts ofCalifornia's Medical Injury Compensation Reform Act of 1975(MICRA), which includes a cap on non-economic damages at $250,000,among other provisions.

Dr. Palmisano noted that the U.S. Supreme Court dismissed achallenge to the non-economic damages cap in MICRA. "However, afederal law is required to ensure that reforms will be effected inall states," he said. A federal law with principles of preemptionwould protect states with existing caps, but at the same time, itwould provide a federal standard for a non-economic cap even ifsuch limits are not allowed by a state constitution.

Mr. Angoff, who is Of Counsel at Brown & Associates inJefferson City, Mo., and had served as Missouri insurance directorbetween 1993 and 1998, argued med mal rate hikes cannot beexplained away as the result of soaring jury awards. Instead, hesuggested that there are several alternate reasons for the risingmed mal insurance cost, such as the poor stock market performanceand low interest rates, and the rising cost of reinsurance sinceSept. 11 terror attacks.

He also pointed to the insurance industry's unique accountingsystem, where companies use "incurred losses," which are justestimates of future losses but not actual payments. And along withthe insurance industry's antitrust exceptions, insurers can actcollectively to overstate incurred losses and raise premiums, Mr.Angoff argued.