Loss estimates in liability study disputed

Claims of inflated estimated losses are based on flawed data, the AMA says, and the best way to control premiums is through tort reform.

By Amy Lynn Sorrel — Posted Feb. 13, 2006

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

Recent studies by consumer groups have stirred debate over the liability insurance crisis, claiming insurers are to blame for inflating estimated losses to justify rate hikes.

But physician groups and insurance industry experts call the reports misleading at best and continue to advocate tort reform to combat skyrocketing premiums. Physicians also have issued reports refuting the consumer groups' findings.

Using data compiled from insurers' annual statements, the Foundation for Taxpayer and Consumer Rights issued a report in December 2005 that found that from 1986 to 1994, insurers reported to state regulators initial estimated losses of $39.5 billion, but actually paid out 30.4% less than that, $27.5 billion.

Physicians Insurers Assn. of America President Lawrence Smarr said the report authors "cherry-picked" the years studied. He said data from the same source the study used show that in later years, insurer payouts actually exceed estimates.

Smarr called the study an attempt to "take the tort reform train off the track" by shifting blame onto the insurance industry.

Carmen Balber, consumer advocate at the Foundation for Taxpayer and Consumer Rights, said the group doesn't expect insurers to be on the money with estimates. But she said when estimates "are consistently higher, there is clearly something wrong with the formula."

She said the years analyzed in the study, "False Accounting: How Medical Malpractice Insurance Companies Improperly Inflate Losses to Justify Sudden Surges in Rates and Tort Reform," reflect the average of five years it takes to process a claim before payouts are made.

Contributing to the study was Jay Angoff, a former Missouri Insurance Commissioner, who authored a similar July 2005 report for the Center for Justice and Democracy. Angoff's study also claimed insurance companies were culpable of increasing premiums to gain profits.

The American Medical Association and the National Assn. of Insurance Commissioners in October 2005 issued reports dismissing Angoff's study as "flawed" because it misused the data. The American Academy of Actuaries also discredited Angoff's work as "unsound."

Responding amid the recent flurry of debate, the AMA in December 2005 produced another report summarizing research from 1975 to 2003 that found insurers in states with caps on noneconomic damages had lower payouts than insurers in states without caps. The AMA report, "The Impact of Caps on Damages: How are Markets for Medical Liability Insurance and Medical Services Affected?" also found that in the long run, states with caps increased physician supply.

Caps not only affect how much is paid out in medical liability lawsuits, but doctors in those states have seen premiums grow at a slower rate, the AMA study concluded.

The AMA said it released the reports to help physicians understand the flood of research on the medical liability insurance environment.

Back to top

External links

The American Medical Association's policy research perspectives, "The Impact of Caps on Damages. How are Markets for Medical Liability Insurance and Medical Services Affected?" and "The 'Angoff Report' A Misrepresentation of the Medical Liability Insurance Industry." (link)

Foundation for Taxpayer and Consumer Rights study, "False Accounting: How Medical Malpractice Insurance Companies Inflate Losses to Justify Sudden Surges in Rates and Tort Reform" (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story

  • Stay informed
  • Twitter
  • Facebook
  • RSS
  • LinkedIn