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Medical liability premiums steady, but big extremes remain

An annual survey shows caps in some states helped keep rates down, but a higher percentage of premiums rose in 2010 than in 2009.

By Alicia Gallegos — Posted Jan. 17, 2011

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Physicians paid about the same for medical liability insurance premiums in 2010 as in 2009, with 67% of rates remaining stable across the nation, according to the annual Medical Liability Monitor survey.

An American Medical Association policy research report issued in December 2010 said the 67% figure was the largest percentage of stagnant premiums in recent years.

Although most rates remained stable, 14.1% of premiums rose in 2010 compared with 6% in 2009.

"While the overall picture is positive compared to a few years ago, there was a slight uptick in premium increases in 2010 -- the first in seven years," said AMA President Cecil B. Wilson, MD. "The medical liability insurance market bears close monitoring for further signals that changes in the legal environment, including reversals of state tort reforms, could be placing pressure on insurers to raise premiums."

Tort reforms -- or a lack of them -- have created a disparate playing field among states, leading to premium relief or nightmares, depending on where doctors practice.

Texas internists, for example, paid about $15,000 in 2010, while general surgeons and ob-gyns in the state paid close to $50,000. Most Illinois internists, on the other hand, dished out about $30,000, while general surgeons paid close to $90,000 and most ob-gyns spent in excess of $100,000.

"Our rates have stabilized but are substantially higher than any surrounding states," said Steven M. Malkin, MD, president of the Illinois State Medical Society. "For us, they're horrible. ... If your rates are stabilized in bankruptcy, I don't think you're really happy."

The bleak insurance climate for Illinois physicians was exacerbated in February 2010, when the Illinois Supreme Court declared unconstitutional the state's noneconomic damage cap of $500,000 for physicians and $1 million for hospitals. Texas, meanwhile, implemented tort reforms in 2003 and has seen a downward trend in premiums.

"A lot of carriers have come into the [Texas] market," said Rocky Wilcox, vice president and general counsel of the Texas Medical Assn. "We've seen an increase in the number of applications for [physician] licensure, and we've been able to populate parts of the state with specialists that we were lacking before."

California still has some of the lowest premiums in the country, and many physicians attribute the low rates to tort reform enacted in 1975, including a $250,000 cap on noneconomic damages.

The Monitor survey, released in October 2010, examined manual rates as of July 1, 2010, for mature claims-made policies with $1 million/$3 million limits for internists, general surgeons and ob-gyns.

Regionally, the Northeast saw an average rise of 1.06% in premiums, while the West dropped by 1.45%. The Midwest saw a 0.12% average increase, and rates in the South fell by 1.38%.

Legal costs rising

Although premium rates stabilized overall, legal costs are rising.

An AMA policy research report issued in November 2010 analyzed claim data from the Physician Insurers Assn. of America, a trade group for doctor-owned and -operated liability companies. The report found that physicians in 2009 paid a median $200,000 in awards and settlements to resolve medical liability lawsuits, a rise of 7.4% since 2000, after adjusting for inflation.

Defense costs, such as payouts to attorneys, have risen sharply in the last decade, according to the AMA report, with a nearly 35% increase from 2000 to 2009. The average bill for defense costs was $47,937 in 2009.

"The number of large jury awards across the country is not abating," said Robert D. Francis, chief operating officer of The Doctors Company, a Napa, Calif., physician-owned liability insurer. "That is a primary driver of long-term increases in severity."

The rising defense fees are being offset by the low frequency of claims being filed, said Lawrence E. Smarr, president and CEO of PIAA. But if that frequency increases, Smarr said there's no telling how severely premiums will be affected.

Mike Matray, editor of the Monitor, said industry history shows any changes to the market will probably not be apparent for several years. He compared the medical liability industry to a wave that rides high for several years before dipping low for a comparable amount of time.

Based on that record, Matray said the industry will not experience real change until 2012 or 2013.

"If the cycle plays itself out, [the market] will be flat next year as well," he said.

Impact of health reform

Some insurance experts say the Patient Protection and Affordable Care Act will have little effect on premiums. But others are concerned about the law's potential impact.

Francis pointed to how the legislation calls for the development of certain quality performance standards for the purpose of differentiating payment levels.

"Conceivably, these standards could be used against health care providers in arguing standard-of-care issues," Francis said in an e-mail. "Efforts must be made to prevent this law from creating new avenues for lawyers to enrich themselves at doctors' expense."

He also said changes in health care delivery, both intended and unintended, could create more "liability traps," as new delivery models are adopted and other technologies are employed.

Chad C. Karls, editor of the Monitor's 2010 rate survey, said the law will put additional strain on the health care delivery system, and that ultimately could manifest as cost pressures. The more patients, the more risk, added Monitor editor Matray.

Overall, however, Matray said the law will not have a significant impact on the medical liability market. "At the end of the day, the model doesn't change too much," he said.

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ADDITIONAL INFORMATION

Holding the line

View in PDF

Click to see data in PDF.

The medical liability market remained mostly stagnant in 2010, with 67% of premium rates holding steady with last year's levels. But significant price gaps still exist among states. Here are the highest and lowest reported premiums for three specialties as of July 1, 2010, for states and counties within them.

Highest premiums
Internists
Florida (Dade) $48,245
Illinois (Cook, Madison, St. Clair) $41,066
Michigan (Oakland, Wayne) $36,988
New York (Nassau, Suffolk) $35,028
Connecticut $34,700
General surgeons
Florida (Dade) $192,982
Michigan (Wayne) 143,445
Illinois (Cook, Jackson, Madison, St. Clair, Will) $127,083
Ohio (Cuyahoga, Lorain) $120,135
Nevada (Clark) $118,125
Ob-gyns
New York (Nassau, Suffolk) $204,864
Florida (Miami, Dade) $201,808
Illinois (Cook, Madison, St. Clair) $177,441
Nevada (Clark) $168,750
New Jersey $159,214
Lowest premiums
Internists
California (Fresno, Madera, Mariposa, Merced, Monterey, San Benito, San Mateo, Santa Clara, Santa Cruz, Stanislaus) $3,200
Minnesota $3,375
South Dakota $3,697
Wisconsin $3,946
Mississippi $4,311
General surgeons
Minnesota $11,306
South Dakota $12,569
California (Fresno, Madera, Mariposa, Merced, Monterey, San Benito, San Mateo, Santa Clara, Santa Cruz, Stanislaus) $13,200
Wisconsin $13,813
North Dakota $16,592
Ob-gyns
California (Fresno, Madera, Mariposa, Merced, Monterey, San Benito, San Mateo, Santa Clara, Santa Cruz, Stanislaus) $13,400
Minnesota $16,449
Wisconsin $18,154
South Dakota $21,073
North Dakota $22,486

Source: Medical Liability Monitor Annual Rate Survey, 2010

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