Malpractice Insurance Premiums Hit a Flat Stretch

October 06, 2015

Malpractice insurance premiums for three bellwether medical specialties remained essentially flat in 2015, after a 7-year run of decreases, but it is not as if rates are poised to reverse direction, according to an annual premium survey released this week by the Medical Liability Monitor (MLM).

Premium rates rose 0.3% on average this year for obstetricians/gynecologists, internists, and general surgeons, but did not rise not uniformly across the country. Rates decreased ever so slightly, on average, in the Northeast, West, and Midwest, but nudged up 0.9% in the South. Physicians in Texas, North Carolina, and Georgia saw average rate increases topping 5%.

Premium trends also varied by medical specialties. Rates rose, on average, by 0.5% and 0.6% for internists and obstetricians/gynecologists, respectively, but slipped 0.2% for general surgeons.

Although the MLM survey reports averages, 71% of the hundreds of rates quoted by insurers across the country in 2015 were unchanged from the previous year, and another 12% were smaller. Only 17% of quoted rates were higher in 2015 compared with 12% in 2014. Most of the increases were less than 10%.

Significantly, 2015 is the first year since 2006 that insurers have reported more rate increases than decreases, according to the MLM. However, medical liability consultant Paul Greve, who coauthored the report with actuary Susan Forray at Milliman, told Medscape Medical News that market conditions still favor continued rate declines. Claims frequency is at a historically low level, and payments to successful plaintiffs are not skyrocketing.

"Every time we've had a crisis with significant rate increases, and you have to go back 15 years to see this, they were always driven by claims trends," said Greve, executive vice president of the Willis Healthcare Practice. "They're about as favorable as they've been in the last 40 years."

At the same time, malpractice carriers have set aside more money in reserves than is necessary to cover future medical liability losses. They can dip into these reserves for the next few years to subsidize low premiums as they compete for market share, said Greve. And their market has shrunk as physicians become employees of hospitals and health systems that self-insure for medical liability rather than purchase coverage from a malpractice carrier.

However, Greve said he has noticed a slowdown in hospitals acquiring specialty practices.

"We've been far enough down the road that hospitals have purchased all the specialty practices they want or need," he said.

Minnesota Malpractice Insurer Quotes $3375 for Internists

In its annual survey, MLM asked insurers to quote their standard rates as of July 1 for medical malpractice 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, and other factors that raise or lower the dollar amount for an individual physician.

The quotes collected by MLM represent 65% to 75% of the medical liability insurance market. Some quotes were for entire states, whereas others were for single counties or metropolitan areas.

The survey includes rate information for seven states with patient compensation funds that reduce the cost of medical liability insurance. In these states, physicians buy a basic policy on their own from a private insurer and pay a surcharge into a fund that boosts their coverage, usually to the $1 million/$3 million level. The rates reported by MLM in these states are the sum of physician premiums and surcharges.

Rates for internists, obstetricians/gynecologists, and general surgeons for a standard $1 million/$3 million policy are all over the map, literally and figuratively.

Table 1. Highs and Lows in Premiums for Medical Malpractice Insurance in 2015

Medical Specialty Lowest Rate1, Locale, and Insurer Highest Rate, Locale, and Insurer
Internists $3375; Minnesota; ProAssurance Casualty $47,707; Miami-Dade County, Florida
Obstetrician-gynecologists $16,240; Central California; Cooperative of American Physicians Mutual Protection Trust $214,999; Nassau and Suffolk counties, New York (Long Island); Physicians' Reciprocal Insurers
General surgeons $10,868; Wisconsin; MMIC Group $190,829; Miami-Dade County, Florida; The Doctor's Company

Source: Medical Liability Monitor

1Standard rates as of July 1 for medical malpractice policies with limits of $1 million for an individual claim and $3 million in any given year for all claims.

The Wild Card of Healthcare Reform

The MLM survey forecasts "continued slow and steady weakening in rate levels." However, it leaves open the possibility that the Affordable Care Act could result in more frequent claims, along with bigger payouts to plaintiffs.

Medical mistakes are waiting to happen, for example, when more individuals gain access to care but spend less time in the exam room, given a physician shortage, according to the survey. And the shift from fee-for-service to bundled payments, capitation, and other forms of pay-for-performance may invite some plaintiffs to argue that their physicians sacrificed quality of care for cost efficiency.

However, healthcare reform also can improve the medical liability landscape. With patients pushed to assume more responsibility for managing chronic illnesses such as diabetes, "noncompliant behavior could create a viable defense to malpractice litigation," coauthors Paul Greve and Susan Forray write.

Right now, it is all speculation. Most insurers surveyed by MLM, the authors said, "continue to believe that it's too early to assess the legislation's impact on claim frequency or severity."

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