Consumer Groups Slam NAIC's Claim Cap Notion

Texas Insurance Commissioner Jose Montemayor, who chaired the property-casualty insurance committee's market conditions working group session, said that while medical-malpractice victims should be compensated, people still have to ask the fundamental question of "how much is enough" on punitive damages.

Mr. Montemayor told group members that the goal of compensating the injured and deterring negligence must be balanced with the urgent need for the continued availability of health care.

Mr. Montemayor and other commissioners, including Washington, D.C., Insurance Commissioner Lawrence Mirel, offered stories from their states of how doctors are fleeing their jurisdiction, retiring early or even abandoning their practices to avoid rising malpractice premium rates. Mr. Mirel said that Washington, D.C., for example, could lose half of its obstetricians by the end of 2004.

But consumer advocates attending the session slammed the report as having hardly any substantial information on insurance topics such as loss control and said that it avoided discussing the real forces behind soaring med-mal premiums for many physicians.

They also argued that stories of physicians fleeing their states or leaving their practices because of higher premiums are largely anecdotal and are "propagandas by the American Medical Association."

"They are wrong?the U.S. General Accounting Office studied that and concluded in its report there is no evidence of that," said Robert Hunter of the Washington, D.C.-based Consumer Federation of America.

The GAO has studied this very issue, Mr. Hunter told the working group, by examining some 17 states to see how many physicians are leaving their states and how many are retiring early or leaving their practices. "The GAO said there may be some cases, but it's not a real widespread problem."

Objecting to the report's focus on litigation reform, Mr. Hunter said, "NAIC is not the American Bar Association; it's a group of insurance experts. But the report doesn't even touch major insurance issues. It just looks stupid?what does NAIC add to the debate if it doesn't add insurance expertise? Why even bother?"

Birny Birnbaum, executive director of the Center for Economic Justice in Austin, Texas, added that the report doesn't analyze any claims costs. "It does a poor job of analysis?for example, it doesn't cite which particular specializations have particular claims costs. So what the report does is take a very broad approach to a problem that requires a much more precise analysis."

Mr. Hunter argued that medical malpractice problems actually stem from insurance-related issues. "One of which is the economic cycle of the insurance companies where every 10 to 15 years there's a hard market, where rates essentially double?that's the problem."

Mr. Hunter also told the market conditions working group members that the report failed to discuss "the pyramid of doctors."

"The problem is that it's not bad if your rate doubles if you happen to be a general practitioner in Virginia and are paying $2,000 for insurance," he said. "But if you are an OB/GYN or a neurosurgeon and are paying 25 times the general practitioner, you are starting at $50,000 or $75,000, and the hard market would double that to $100,000 or $150,000." This can be especially burdensome now because, unlike in previous insurance cycles, physicians have much more difficulty passing those costs back to Medicare or HMOs, Mr. Hunter said.

He also told regulators that they shouldn't be talking about tort reform, but if they do, they should at least have a balanced presentation that illustrates the negative side of tort reform for consumers.

Mr. Hunter argued the report's tort reform proposals had a consistent anti-consumer bias, with no "quid pro quo" for consumers. For example, he cited that while Michigan's auto insurance reform eliminated the right to sue through a no-fault system, it repealed limits on accident victims' rehabilitation services. The NAIC report, on the other hand, proposes to "take away the rights of victims and give them nothing in return."

"[The NAIC report's proposals] would be just a very bad deal for people who are consumers of medical care," he said. "If a doctor makes a mistake, why should you have a limit on what you can get? It doesn't make sense."

Mr. Birnbaum also noted at the working group session that the draft report ignores medical malpractice insurers' lackluster investment income, which he suggested has been a major contributing factor in soaring premium rates. "The report is inaccurate in a number of ways?it doesn't analyze how a reduction in investment income had a major impact on insurers' revenues," he said.

Also speaking at the working group session was Ruth Bernstein from the Association of Trial Lawyers of America in Washington, D.C., who disputed the report's claims that the current tort system needs to be fixed.

She told regulators that jury awards are subject to judicial and appellate review and are often reduced. Ms. Bernstein also remarked that the distinction between economic and non-economic damages is discriminatory, because it puts victims with no income?including children and nonworking women?at a disadvantage when getting economic damages in jury awards.

After a lengthy and wide-ranging debate at the session, Mr. Montemayor, chairman of market conditions working group, decided not to bring the report to a vote at the meeting. The group will now work on revising the draft report with an eye toward possibly adopting the revised version by the end of the month.