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 National Association of Insurance Commissioners held a public hearing on the availability and affordability issues regarding medical malpractice insurance–a topic that has gotten a lot of attention recently in the wake of doctors’ job actions and rallies around the nation.

But participants at the Saturday, March 8, hearing offered deeply 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 getting worse.

On the other side of the debate, attorney Jay Angoff, a representative of the American Trial Lawyers Association, disputed the severity of crisis by arguing that the average premium paid by doctors across several specialties is only a small portion of their income.

Dr. Palmisano said the AMA has identified 18 states–including Florida, Illinois, New Jersey, New York, Texas and Pennsylvania–that are experiencing a full-blown crisis. Additionally, 26 more states have the potential to join this list.

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

In Pennsylvania’s case, premiums of major private insurance carriers rose between 80 percent and nearly 150 percent between 1997 and 2001. In 2002, the rise in filed premiums ranged from 40 percent to more than 50 percent, and similar increases were filed again this year, Dr. Palmisano noted.

In January, Abington Memorial Hospital in Pennsylvania had to temporarily suspend its trauma center because there weren’t enough on-call surgeons who could afford professional liability insurance, he recalled. Furthermore, in the past five years, eight companies have stopped offering med mal insurance in the state, with only two carriers now remaining.

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

Offering a different set of numbers, Mr. Angoff said that in 2001, the median income for primary care physicians was more than $149,000, a 9.7 percent jump from 1997. Specialists, he said, had a median take of about $263,000, which represents some 20 percent increase from the 1997 figure–and “much more than what state regulators make.”

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

“As a result of these large jury verdicts, insurance companies are forced to raise their premiums, otherwise face insolvency. We believe the litigation system is creating this crisis. The current system is critically flawed.”

“Now is the time for a uniform federal-level regulation for tort reform, including capping non-economic damages in jury awards,” he said, going on to give an analysis of the positive impacts of California’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 a challenge to the non-economic damages cap in MICRA. “However, a federal law is required to ensure that reforms will be effected in all states,” he said. A federal law with principles of preemption would protect states with existing caps, but at the same time, it would provide a federal standard for a non-economic cap even if such limits are not allowed by a state constitution.

Mr. Angoff, who is Of Counsel at Brown & Associates in Jefferson City, Mo., and had served as Missouri insurance director between 1993 and 1998, argued med mal rate hikes cannot be explained away as the result of soaring jury awards. Instead, he suggested that there are several alternate reasons for the rising med mal insurance cost, such as the poor stock market performance and low interest rates, and the rising cost of reinsurance since Sept. 11 terror attacks.

He also pointed to the insurance industry’s unique accounting system, where companies use “incurred losses,” which are just estimates of future losses but not actual payments. And along with the insurance industry’s antitrust exceptions, insurers can act collectively to overstate incurred losses and raise premiums, Mr. Angoff argued.