New York's insurance regulator announced yesterday that he has approved a 14 percent increase in medical malpractice insurance rates, which he said have been artificially suppressed for years.

Superintendent Eric R. Dinallo said while lower than the 16.6-to-30.6 percent large insurers had requested, the increase is necessary to avoid "further financial deterioration of the companies and perhaps an irreversible crisis in an already severely distressed market."

Companies face insolvency, he said.

Since 2003, the insurance industry has been proposing double-digit increases for medical malpractice and has received about a third of what they asked. Yesterday's action by Mr. Dinallo is the first time the department has approved a double-digit hike. His move drew angry protests from doctors' groups.

State of New York Medical Society President Robert Goldberg said the increase means "that a Long Island neurosurgeon will now have to pay an outrageous $309,311 for just a single year of coverage; a Brooklyn or Queens OB-GYN will now pay $173,061; and a Westchester orthopedic surgeon will now pay $108,679."

He said even prior to this most recent rate increase announcement, physician liability insurance costs for many surgical specialists across New York State had almost doubled over the last five years.

"The latest increase announced today will throw gasoline on this already raging fire," he said.

But Mr. Dinallo said the rate increase "comes after years of setting rates below what was needed; the state's appropriation for general state expenses of $691 million of medical malpractice insurance reserve funds, which could have served to enhance insurer solvency and temper rate spikes; and the prior failure to successfully address the underlying causes of high medical malpractice costs."

At the same time as the rate increase news, it was announced that Gov. Eliot Spitzer has asked Mr. Dinallo to head a new task force to confront the fundamental drivers of high medical malpractice costs.

The task force, which will report back to the governor by the end of the year, will include New York State Health Commissioner Dr. Richard F. Daines and a range of representatives from the insurance industry, physician and hospital associations, consumer groups, health plans, trial lawyers, and the Legislature.

Dr. Goldberg said the Society applauds the decision to create a task force to "finally and comprehensively address the tort and medical malpractice insurance problems."

He added, "Without this rate approval paired with a new, comprehensive effort to address the underlying causes of high insurance costs, the medical malpractice insurance industry will continue to deteriorate into crisis."

Mr. Dinallo said that "after years of failing to confront the fundamental problems that have led to this current environment, we have inherited the worst of both worlds: physicians who cannot afford to practice medicine, and insurers whose financial condition is rapidly eroding. The cause is high medical liability costs--and this administration is going to address it."

He said the rate increase "is less than what carriers sought and is what our experts believe is necessary to stave off an industrywide crisis unless the underlying problem of high medical malpractice costs is addressed."

In establishing the task force, Gov. Spitzer said: "Due to years of inaction, the medical malpractice insurance market has reached a crisis level. This administration will not turn a blind eye to this situation. We will tackle this problem head on."

Medical Liability Mutual Insurance Company (MLMIC) is the largest New York carrier, with about 60 percent of the market. Physicians Reciprocal Insurers is the second largest, with more than 20 percent of the market, according to the insurance department.

As a result of artificially low rates, combined with the failure to effectuate needed reforms to address the root causes of high medical liability costs, insurance companies now face the real prospect of insolvency while physicians simultaneously face the reality of soaring insurance costs.

Special Reports /

N.Y. Approves 14% Med-Mal Hike

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