Malpractice Premiums Drop for 6th Straight Year

October 10, 2013

Judging by 3 representative specialties, physicians in 2013 are once again experiencing relief on malpractice insurance premiums.

Collective rates for obstetrician-gynecologists, internists, and general surgeons fell on average for the sixth straight year in 2013, according to an annual premium survey released this week by Medical Liability Monitor (MLM).

The decrease is only 1.9%, a tad more than the 1.7% decline in 2012. However, one group views the ongoing premium shrinkage as more evidence that organized medicine's push for tough medical-liability tort reform, such as limits to noneconomic damages, is much ado about very little.

"It makes sense that premiums are going down because malpractice litigation is going down," said Taylor Lincoln, a research director for the consumer watchdog Public Citizen, in an interview with Medscape Medical News. Lincoln's organization announced in August that the number of malpractice payments on behalf of physicians as reported to the National Practitioner Data Bank fell for the ninth consecutive year in 2012. Public Citizen maintains that malpractice litigation cannot be blamed for runaway healthcare costs.

Asked to comment on the numbers from MLM, the American Medical Association (AMA) issued a statement from its president, Ardis Dee Hoven, MD, to Medscape Medical News:

"Although the 2013 Medical Liability Monitor [survey] suggests decreases in premiums have become more common than premium increases, they pale in comparison to the magnitude of the increases experienced during the most recent liability crisis," said Dr. Hoven. "We are committed to testing alternative reforms, such as safe harbors for the practice of evidence-based medicine, to determine if these innovations can improve patient care and reduce costs.”

The AMA, she said, "continues to work for proven reforms to rein in the broken medical liability system, reduce the growth of healthcare costs, and preserve patients' access to medical care."

Chad Karls, an actuary who summarized premium trends in an article for MLM, sees both sides of the argument.

For proponents of tort reform, "the wind has been taken out of their sails a little bit," said Karls, a principal and consulting actuary for Milliman. "Premium costs are lower than what they were a decade ago. However, it doesn't necessarily mean that they shouldn't be lower."

Falling premiums, Karls told Medscape Medical News, reflect a roughly 50% drop in malpractice claims per physician since the liability crisis in the early 2000s that the AMA references. In both 2003 and 2004, premiums shot up roughly 20%, according to MLM. State-level tort reform accounts for some of the decrease in malpractice claims, Karls said. However, claims frequency also has declined in states that lack such laws.

The 1.7% drop in premium rates this year for the combined specialties of obstetrics-gynecology, general surgery, and internal medicine, Karls noted, applies more or less to each individual specialty as well. In other words, it isn't as if decreases for 2 specialties erased an increase for the third.

86% of Rates Decreased or Did Not Change

The MLM survey analyzes malpractice insurance rates charged by carriers in markets that range from entire states to single counties. The publication asks insurers to quote their standard rates for policies with limits of $1 million for an individual claim and $3 million in any given year for all claims. Rates published by MLM, effective as of July 1, are not necessarily what physicians pay, because insurers apply a variety of credits, debits, and other factors that raise or lower the dollar amount.

Insurers lately have been liberal with credits, reducing rates for physicians who take a risk-management seminar or use an electronic health record system, said Karls. Such credits probably have lowered rates by an additional 2 or 3 percentage points in 2013.

MLM collected hundreds of premium quotes that represent 65% to 75% of the medical liability insurance market. In a virtual replay of 2012, 57.6% of the 2013 quotes remained the same from the year before, 28.8% decreased, and 13.7% increased, usually by less than 10%.

The survey includes rate information for 7 states with patient compensation funds designed to lower the cost of malpractice coverage. Every physician in the state pays a surcharge into the fund in addition to buying minimal coverage from a private insurer, said MLM editor Michael Matray. Acting essentially as a reinsurer, the compensation fund boosts the coverage — in some states to the $1 million/$3 million level. The rates that MLM reports for these states are the sum of physician surcharges and premiums.

Rates for Internists Range From $3375 to $47,707

As in previous years, the MLM report reveals where malpractice litigation is red hot and where it is blue-green cool. Premium rates, after all, are based on an insurer's claims experience in a given locale.

The most expensive premiums for a $1 million/$3 million policy for internists once again turned up in Miami-Dade County, Florida. There, the Doctors' Company quoted a rate of $47,707. The nation's lowest rate for internists was $3375, quoted by ProAssurance Wisconsin Insurance for the entire state of Minnesota.

The New York counties of Nassau and Suffolk on Long Island are home to the highest rates for obstetrician-gynecologists — $227,899 from Physicians' Reciprocal Insurers. On the low end is a quote of $16,240 from Cooperative of American Physicians (CAP) for ob/gyns in mid-California. The quote is on top of CAP membership dues of $440 each year.

For general surgeons, quoted rates range from $190,829 from the Doctors' Company for Miami-Dade County to $10,868 from MMIC Group for Wisconsin.

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