Regional Variation in Malpractice Premiums Defies Tort Reform

November 02, 2010

November 2, 2010 — Annual malpractice insurance premiums for physicians in 2010 continue to be all over the map — literally — with carriers charging general internists as little as $3200 in Monterey, California, and as much as $48,245 in Miami, Florida, based on a Medscape Medical News analysis of the annual rate survey by the publication Medical Liability Monitor (MLM).

Experts attribute some of the wide variation in premiums to tort reform laws in some states that are designed to curb frivolous suits and runaway jury awards. Even in states that have enacted such laws, however, malpractice insurance premiums in 1 region may be 2 or 3 times higher than elsewhere. This variation gets chalked up to differences in judges and plaintiffs' attorneys, as well as the relative propensity of local residents to either sue or hand out big jury awards.

California is a poster child for tort reform because of its $250,000 cap on noneconomic damages (or pain and suffering) in malpractice cases. Twenty other states have imposed such limits, and many physicians and political conservatives would like to institute a California-style cap on a national scale — after all, it is credited with keeping rates generally affordable in the Golden State. Yet a carrier called Norcal Mutual Insurance charges obstetrician/gynecologists a base rate of $89,953 if they practice in Los Angeles and Orange counties, but only $30,463 if they practice in the more northerly counties of San Mateo, Santa Clara, Santa Cruz, Fresno, and Monterey, according to MLM.

The same pattern emerges in Texas, which is also touted as a tort reform success story. Since the state enacted a $250,000 cap on noneconomic damages in 2003, claims and lawsuits in most counties have fallen by half, malpractice premiums have decreased on average by 27.6%, and physicians are moving into the state instead of moving out, according to the Texas Medical Association. At the same time, malpractice premium rates are uneven, to say the least. A carrier called Medical Protective charges a base rate of $25,441 for internists in Hidalgo County on the Mexican border, but more than halves the price to $11,994 in Potter County in the Texas Panhandle to the far north, MLM reports. Likewise, rates for general surgeons are more than twice as high in Hidalgo County ($92,242) as they are in Potter County ($44,434).

Rates Lower Than $10,000 for Internists Available in 29 States

MLM publishes malpractice insurance premiums by region, which may be an entire state, a single county, or a group of counties. The publication asks 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.

These rates do not reflect credits, debits, dividends, underwriting factors, or anything else that would increase or decrease the cost. Medical specialties whose premium ranges are listed in the annual survey are limited to general internal medicine, general surgery, and obstetrics/gynecology.

In 2010, malpractice insurance premiums decreased on average for the 3 specialties by 0.5%, after declines of 2.5% in 2009 and 4.0% in 2008, according to MLM. The decline has coincided with a fall-off in the number of malpractice claims filed by patients.

The highest quote for general internal medicine was $48,425 for Miami-Dade County, Florida, from First Professionals Insurance. The honor for the lowest premium for general internists goes to Cooperative of American Physicians, which charges $3200 in 10 counties in mid-California. ProAssurance Wisconsin Insurance places a close second, charging premiums of $3214 in Nebraska. Such 4-figure rates for this specialty are not flukes. Altogether, rates lower than $10,000 for general internists can be found in 29 states, according to MLM.

For general surgeons, Nebraska and Miami-Dade County, Florida, also account for rate extremes, with ProAssurance quoting $10,928 in the former and First Professionals Insurance quoting $192,982 in the latter. Some carriers in Illinois, Michigan, Nevada, New York, Ohio, and Pennsylvania also top $100,000 for general surgeons, although other carriers in many of these states undercut their prices considerably.

The rate picture is worse for obstetrician/gynecologists. MLM reports that some of the carriers in 17 states — Arizona, Connecticut, Florida, Illinois, Maryland, Michigan, Missouri, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Utah, Texas, Virginia, and West Virginia — as well the District of Columbia charge obstetrician/gynecologists more than $100,000. The highest obstetrician/gynecologist rate, from Physicians Reciprocal Insurance, is $204,864 for the New York counties of Nassau and Suffolk, which make up the bulk of Long Island. A quote of $201,808 in Miami-Dade County from the Doctors Company is not far behind.

The other extreme for obstetrician/gynecologists is $13,400 in central California from Cooperative of American Physicians. Next lowest was $16,449 in Minnesota from MHA Insurance.

"Tort Reform Doesn't Change Culture"

Malpractice insurance companies base their premiums on claims activity; specifically, the number of claims as well as the dollar amount of settlements and jury awards, according to Lawrence Smarr, president of the Physician Insurers Association of America. Smarr said the sheer frequency of claims has a monetary effect.

"Physicians win 80% of claims that go to trial, but an insurer can spend $150,000 defending such a case," Smarr told Medscape Medical News.

Capping noneconomic damages in malpractice cases is designed to lower premiums by reducing jury awards as well as the number of lawsuits — patients and plaintiffs' attorneys arguably have less of an economic incentive to sue. Smarr said caps enacted by various states are having their intended effect of keeping premiums low, and pointed to California and Texas as examples.

Not all malpractice cap laws are created equal, however. Florida limits noneconomic damages to $500,000 per physician, which is twice as high as the caps in California and Texas. And the Florida law ups the ante to $1 million in cases of death, permanent vegetative state, and catastrophic injury such as blindness or limb amputation, or when the court finds that a "manifest injustice" would otherwise occur.

"This cap isn't as tight," said Smarr. Perhaps not surprisingly, malpractice premiums in Florida are among the highest in the nation.

Even when tort reform does tame malpractice premiums, it does not eliminate wide variations within a state, Smarr added. "Tort reform doesn't change culture."

Some regions in a state can be more litigious than others, he explained. "Look at it from the standpoint of the big city environment vs the rural environment," he said. "People just don't sue as much in rural areas." Some experts have attributed fewer lawsuits in the cornfields to traits like agrarian self-reliance.

Likewise, demographics also can influence the size of jury awards, said Smarr, although some medical-liability experts argue that this influence is minor.

"Washington, DC, is considered a bad place to go before a jury," said Smarr. "The expectations in Washington, DC, are far greater than those in rural places."

The expertise of the plaintiffs' bar also varies by locale, according to Smarr. Big cities, he said, tend to spawn more attorneys who specialize in medical malpractice. "To win these cases, you must be very knowledgeable in medicine as well as law," said Smarr. "You find that in certain places."

Judges constitute yet another variable that raises malpractice premiums in some areas and lowers them in others. The American Tort Reform Foundation (ATRF) regularly publishes a list of "judicial hellholes" where judges, in the words of ATRF, "systematically apply laws and court procedures in an unfair and unbalanced way, generally against defendants in civil lawsuits." In its latest report, ATRF names South Florida as the nation's worst place for a trial.

That would be Miami-Dade County, where an obstetrician/gynecologist is lucky to pay just $100,000 in malpractice premiums.

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