Liability insurance rates mostly hold steady or drop this year

Medical liability insurers reported that nearly 70% of their premium rates have leveled off or decreased in some areas, almost double the 35% reported in 2005, according to results from the annual Medical Liability Monitor survey that details how much insurers charge doctors.

But the improvement offers no high ground for doctors who, after a flood of rising premiums over the last five years, are seeing rates anchor at or near record-high levels.

For example, some Florida internists, general surgeons and ob-gyns saw the largest rate decreases in the country -- about 50%. But some of those Florida doctors also paid the nation's highest premiums in their specialty, with some general surgeons and ob-gyns in Dade County paying $299,420 in 2006, the survey showed.

"There's no question there may be some stabilization, but it's at an obscene rate," said AMA President William G. Plested III, MD. "That's only half the story, and it doesn't approach this awful medical liability system that is costing patients and physicians."

The Monitor survey asked firms to report their manual rates for mature claims-made policies with limits of $1 million/$3 million as of July 1 for three specialties.

Of the 837 rates reported, 47% did not change in 2006, nearly double the 24% reported last year. Another 23% of rates were cut, more than double the number in 2005.

But doctors and insurers say early signs of a better market for physicians could be short-lived.

"The frequency of claims has really leveled off, maybe even declining in some places, like Texas. But the long-term rise in the severity [of jury awards] is still with us," and might warrant future rate hikes so that insurers can keep up with costs, said Lawrence E. Smarr, president of the Physician Insurers Assn. of America, a trade group of medical liability companies owned or operated by doctors.

More than 90% of firms responding to the Monitor's survey said rates are stabilizing, up from 81% in 2005. None believed "large increases" are necessary, down from 6.3% last year. But that would change if patients begin filing more lawsuits, insurers noted.

Litigation costs also continue to drive up insurance prices, making the future uncertain, doctors and insurers say. A first-time report by the Ohio Dept. of Insurance showed that 80% of the 5,051 claims closed in 2005 resulted in no payment. But nearly 92% of the claims incurred defense expenses, totaling $113 million, or about $24,000 per case.

"The trend of [rate] increases has flattened," said Ohio State Medical Assn. Executive Director D. Brent Mulgrew, "but we're still paying an awful lot of money for this system."

The questionable staying power of tort reform also has insurers' optimism waning. According to the Monitor's survey, 60% of companies in states that passed reforms in the past year said they had concerns about the laws' constitutionality.

Several recent state court rulings have not been friendly to doctors. A court decision led Wisconsin to up its cap to $750,000. In Louisiana, the long-time cap is up in the air, with the state Supreme Court set to hear an appeal of a September lower court ruling that found the $500,000 cap too low.

Hopes of tort reform on a national level are nearly nonexistent among insurers. A single firm told Monitor surveyors that tort reform would come out of Congress, compared with 21% saying that last year.

Still, the survey continues to show the direct results of significant tort reforms, the AMA's Dr. Plested said.

For example, Texas voters in 2003 passed a $250,000 cap as a constitutional amendment, making it difficult for a court to overturn. Texas Medical Liability Trust, which insures nearly half of the doctors in the state, cut rates by 5% this year and has slashed them an average of 29.5% since the law took effect, the Monitor report states.

In Illinois, Harold L. Jensen, MD, chair of the physician-owned ISMIE Mutual Insurance Co., said the company cut rates by an average of 5.2% this year, due to a "halo effect" after passage of a $500,000 cap in 2005. Still, the state came in a close second for the highest rates in the nation, the Monitor's survey shows.

"It's looking better," Dr. Jensen said. "But it took us a long time to spiral into the mess we're in, and to believe we're going to pull out in six months to a year is not realistic."