Malpractice Premium Trends Belie Malpractice Crisis

October 05, 2017

The cost of medical malpractice insurance dropped 1.1% for three bellwether medical specialties in 2017, which would be the 10th consecutive year of decline except for a 0.2% increase in 2015, according to an annual premium survey released this week by Medical Liability Monitor  (MLM).

The findings belie the notion of a medical liability crisis despite the continued push by Congressional Republicans and organized medicine to cap noneconomic damages in such lawsuits and enact other tough tort reforms. Insurance premiums continue to trail inflation for many physicians, some of whom pay less in unadjusted dollars than they did in 2001. A carrier called MMIC, for example, quoted general surgeons in Wisconsin $10,868 based on rates filed with that state. Back in 2001, the quote was $15,980.

The other two specialties covered in the survey besides general surgery are general internal medicine and obstetrics-gynecology.

The low rates partly reflect a frequency of malpractice claims that, with a few exceptions, remains "relatively flat and near historic lows" across the insurance marketplace, wrote medical liability expert Paul Greve, who coauthored an analysis of the MLM survey results. Greve, the executive vice president of the healthcare division of Willis Towers Watson, credits the climate of claims stability in part to patient safety programs that keep would-be plaintiffs out of harm's way, and state-level tort reforms that dampen the number of suits.

Big-box medicine also contributes to declining premiums. Hospitals and large group practices tend to self-insure. As such entities hire more and more physicians, medical malpractice carriers feel pressure to reduce their rates to compete for a shrinking pool of independent physicians.

And carriers can afford to offer competitive rates because they sit on ample cash reserves, Greve told Medscape Medical News. "The industry is well capitalized, and it can absorb low rates at the moment."

Rates Fell the Most in the Midwest

MLM asked medical malpractice carriers in its annual survey to quote their standard rates as of July 1 for policies with limits of $1 million for an individual claim and $3 million in any given year for all claims. These rates don't take into account credits, debits, and other factors that raise or lower what an individual physician pays.

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

The survey includes rate information for seven states with so-called patient compensation funds that lower the cost of malpractice insurance. Physicians purchase a basic policy from a private insurer and pay a surcharge into a fund that boosts the policy's coverage, usually to the $1 million/$3 million level. Reported rates in these states are the sum of physician premiums and surcharges.

Rate trends are remarkably consistent across the three medical specialties surveyed. Premiums decreased 1% for obstetricians/gynecologists and general surgeons and 1.1% for internists.

There was slightly more variation in terms of geography. Rates rose 0.6% in the Northeast and fell 0.9% in the South, 2.1% in the Midwest, and 0.8% in the West.

Bump Up for Jumbo Verdicts and Settlements

Greve told Medscape Medical News that he doesn't see any significant rate increases coming in the near future, given the competition among carriers to insure fewer and fewer independent physicians.

So, all would be appear to be well, according to Greve. "We're not in a crisis. We're definitely not in a crisis. But there are challenges."

One challenge is a bump up in the number of jumbo jury awards and settlements. Fourteen percent of med-mal insurers surveyed reported an increase in claims topping $1 million.

"We're seeing this not just in the physician space but also in malpractice cases involving hospitals and long-term care facilities," said Greve, noting recent headlines about jury awards of $20 million and $30 million. Too many payouts like these could nudge premiums up.

It's a bit of a paradox, he said. The frequency of claims is flat, suggesting perhaps a change in attitude about suing physicians. Greve said it was telling that the frequency of medical malpractice claims didn't increase during the 2008 economic downturn as it did in previous downturns. But when juries find fault, they may be more punitive. Greve speculates that some of the big awards may reflect deep dissatisfaction with the nation's healthcare system ― its high costs, its coverage gaps, and the debate about reforming it.

"There could be some carryover," said Greve. "There's an outrage factor."

Follow Robert Lowes on Twitter @LowesRobert

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