Malpractice Insurance Premiums Declined Slightly in 2010

October 11, 2010

October 11, 2010 — Malpractice insurance premiums for internists, general surgeons, and obstetrician/gynecologists in 2010 decreased on average for the third year in a row, but barely, according to the publication Medical Liability Monitor (MLM).

The rate of decline in 2010 is 0.5% compared with 2.5% in 2009 and 4% in 2008, reports MLM, which surveys malpractice carriers each year.

Falling rates — considered a "soft" market for carriers — are a welcome change of pace from the hard markets of 2003 and 2004, when physicians endured rate increases of roughly 20%. However, MLM editor Michael Matray foresees a possible return to rising rates in the near future, partly because of healthcare reform.

"These cycles repeat themselves — hard market, soft market, hard market, soft market," said Matray. "What we're seeing is not out of the ordinary."

MLM tracks hundreds of malpractice insurance rates charged by multiple carriers on a local level, whether they are for an entire state, a portion of the state, or a single county. The organization asked carriers for their standard rates for policies with limits of $1 million for an individual claim and $3 million in any given year for all claims. MLM reports on the specialties of internal medicine, general surgery, and obstetrics/gynecology to mirror a broad range of premium rates across medicine.

Of all rates in 2010, 67% did not change from 2009. Another 19% decreased, with the steepest declines reported for internists, general surgeons, and obstetrician/gynecologists (all at 23%) in Tennessee. Another 14% of rates increased, but usually by less than 10%, according to MLM.

Decline in Lawsuit Frequency Began About 7 Years Ago

Chad Karls, an actuary with Milliman, writes in the annual rate survey issue of MLM that declining premiums have coincided with a fall-off in the frequency of malpractice claims that began about 7 years ago and has continued into 2010.

However, claims frequency is increasing in some geographic markets, which may portend higher rates. The current economic doldrums could exert upward pressure on claims, writes Karls, who marshals evidence to show that higher unemployment translates into more lawsuits. In addition, defense costs per claim are rising.

Karls writes that healthcare reform also may spur more malpractice claims because adding tens of millions of newly insured Americans will strain a shorthanded cadre of healthcare providers. MLM editor Michael Matray put that point another way: "An overstressed healthcare system is more open to mistakes, and mistakes lead to lawsuits."

This prediction notwithstanding, Karls reports that only 31% of insurers expect healthcare reform to increase either the frequency or severity of malpractice claims.

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