Liability premium shock is spreading, an AMNews exclusive survey shows

But physicians in Texas and Mississippi say they're a little better off today than they were in 2001.

By Jessica Diehl — Posted Jan. 31, 2005

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In 2001, a few physicians started whispering the term "liability crisis," but by the end of 2004 those whispers had turned into a chorus of shouts.

At least one company raised liability premiums 40% or more in 19 states in 2004, according to an AMNews analysis of data from state insurance departments, medical societies and insurance companies.

In 2001, 12 states had increases of that magnitude, according to the data.

Physicians in even more states feel the crunch today. The analysis showed that at least one company in 34 states raised rates 25% or more in 2004. That's nearly double the 18 states with that experience in 2001.

"In Illinois, OBs were paying $80,000 a year for insurance; now they are paying $147,000. In Florida, they were paying $166,000, and now they are paying $270,000. That shows that the landscape has changed," said American Medical Association President-elect J. Edward Hill, MD.

Higher premiums can have a big impact on physicians, who are often forced to cover the extra business cost without additional reimbursement. HMO contracts don't let physicians pass along the costs. And for years doctors have said that Medicaid and Medicare reimbursement rates are set at levels that don't cover overhead.

So, nearly four years since liability problems were first seen in Pennsylvania and West Virginia, more physicians in more states say they are factoring liability premiums into their practice decisions. The financial implications factor into deciding whether to continue practicing medicine in a particular state, whether to continue high-risk procedures and whether to become politically active.

The landscape shifts

Physicians began to sense they were in for a rough few years in 2001. But they didn't expect things to reach the level they have in some areas.

The situation escalated in December 2001 when the St. Paul Companies announced that it was pulling out of the medical liability insurance market. And the situation in most states has been deteriorating since.

James P. Marvel Jr., MD, president of the Medical Society of Delaware, said Delaware is surrounded by states that have made the AMA's list of 20 states in a medical liability crisis. "That worries us," he said.

In 2001 and 2002, physicians moved to Oklahoma to escape high rates in Texas, Pennsylvania and Florida, said Jack J. Beller, MD, immediate past president of the Oklahoma State Medical Assn. "Now we are seeing our physicians retiring early and stopping some high-risk procedures," he said.

Arizona doctors are also concerned. "The landscape here is changing, and it's changing dramatically," said Chic Older, executive vice president of the Arizona Medical Assn. "I don't think we are at a crisis point yet, but we are on track."

Delaware, Oklahoma and Arizona are among the states in which at least one insurer increased rates by 40% or more in 2004; none made the 2001 list.

In North Carolina -- another state to make the 40% list in 2004 but not 2001 -- women in some western parts of the state have to drive 50 miles to see an obstetrician, said Robert W. Seligson, executive vice president of the North Carolina Medical Society. But physicians also worry that charity care for the uninsured is suffering.

"Because of the economic realities of running a practice today, doctors will sometimes have to limit free care so they can cover their premiums," Seligson said.

Doctors have asked -- and continue to ask -- their state and federal lawmakers for help in changing the medical liability landscape.

Taking action

Most physicians say they never thought marching on their state capitols and lobbying Congress for tort reforms would be part of their job description. But it increasingly has been since 2001.

To stabilize premiums, legislatures in every state having problems and some states looking to stave them off have considered or will consider liability reforms. Bills range from capping the amount of money juries award for pain and suffering to shortening the amount of time plaintiffs have to file a claim.

"The war is on," said Brian O. Foy, executive director of the Oklahoma State Medical Assn. "We've won some battles, but there are still more to win."

Oklahoma's Legislature passed noneconomic damages caps that apply to some high risk specialties, and that has helped. But not all physicians are covered, and doctors say there is more to do.

National tort reform that includes a $250,000 cap on noneconomic damages awarded in medical liability cases has been the AMA's top advocacy priority since June 2002 and remains the Association's top priority in 2005. Finding enough votes to block a Democratic-led filibuster in the Senate has been the stumbling block for the measure. But doctors are closer to achieving that goal after Republicans picked up four Senate seats in the November 2004 election.

"We are more optimistic than ever before," Dr. Hill said.

Some bright spots

Some states already have seen results from measures they enacted after rates began to rise in 2001.

In September 2003, Texas voters passed a constitutional amendment to make a $250,000 noneconomic damages cap legal. That has improved the state's liability climate, said Edinburg internist Linda Villarreal, MD.

Although things are not perfect, it's easier to recruit physicians, fewer lawsuits are being filed, and more insurance companies are willing to write policies, she said. "The atmosphere is just so much more pleasant."

Things also are brighter in Mississippi today than several years ago. Lawmakers in 2002 passed a $500,000 cap on noneconomic damages. Although Cleveland, Miss., obstetrician-gynecologists Mark Blackwood, MD, and Bradley Baugh, MD, closed their practice for a short period in 2002, they reopened. Dr. Blackwood wants to see reforms at the federal level, and he's optimistic that rates will come down in the future.

"We're still practicing medicine," he said.

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Mapping rate increases

Below is a snapshot of the highest rate increase filed by any one insurer in a state for the given year. Insurance rate increases are one of several factors the American Medical Association considers when deciding whether to add a state to its list of crisis states, in which physicians are curtailing high-risk procedures, retiring or moving.


100% or higher: Arkansas, Illinois, Ohio

40% to 99.9%: Connecticut, Florida, Georgia, Michigan, Mississippi, Nevada, Pennsylvania, South Carolina, Texas

25% to 39.9%: Alaska, Kansas, Louisiana, Missouri, North Carolina, Virginia

0% to 24.9%: Alabama, Arizona, California, Colorado, Delaware, District of Columbia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, Wyoming


More than 100%: Illinois, Mississippi, Oklahoma

40% to 99.9%: Arizona, Colorado, Connecticut, Delaware

Florida, Iowa, Maryland, Michigan, New Jersey, North Carolina, Ohio, Oregon, South Dakota, Washington, Wisconsin, Wyoming

25% to 39.9%: Alaska, Georgia, Hawaii, Idaho, Indiana, Louisiana, Maine, Massachusetts, Missouri, Montana, Nevada, New Hampshire, North Dakota, South Carolina, Tennessee

0% to 24.9%: Alabama, Arkansas, California, District of Columbia, Kansas, Kentucky, Minnesota, Nebraska, New Mexico, New York, Pennsylvania, Rhode Island, Texas, Utah, Vermont, Virginia, West Virginia

Note: Insurance rate decreases are rare. But in 2004 two states -- Louisiana and Texas -- saw at least one insurance company file a rate decrease. In 2001, four states saw at least one company file a rate decrease: Colorado, Louisiana, Michigan and New York.

Sources: State insurance departments, some state medical societies and individual insurance companies

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Bigger bills in 2004

More companies offering medical liability insurance raised rates by at least 25% in 2004 than in 2001. Here are the number of states that saw at least one medical liability insurer file a rate increase in the given range. Most states experienced rate changes, including a few decreases, that fell in more than one range. The chart places states in the range of the highest increase filed for the state.

Number of states
Rate increase filed In 2001 In 2004
100% or higher 3 3
40% to 99.9% 9 16
25% to 39.9% 6 15
0% to 24.9% 33 17

Note: State totals include the District of Columbia.

Sources: State insurance departments, state medical societies and individual insurance companies

How we gathered the data

In 2001 and again in 2004, AMNews asked state insurance departments for data on medical liability insurance rate filings for the year. In the few instances in which the state could not provide information, state medical societies and individual insurance companies provided the information. In some instances, companies that insure a small number of physicians in the state could have been the ones to file large rate increases.

Also, some states might have experienced large increases in years other than the two that AMNews highlighted. Physicians in those states could now be experiencing smaller rate increases on already high rates due to possibly large increases in other years.

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