July 8, 2005 – Calls for reform in medical malpractice law may be aimed in the wrong direction, according to a study released yesterday which found that the leading malpractice insurers raised their rates dramatically over the last four years even though the amount they had to pay in lawsuits remained virtually flat.
While medical malpractice reform enthusiasts have blamed rising insurance premiums on the prevalence of lawsuits against doctors and medical providers, industry watchdogs have frequently pointed to studies showing that lawsuits have little do with the price of malpractice insurance.
The most recent study, "Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry," conducted for the Center for Justice and Democracy by former Missouri Insurance Commissioner Jay Angoff, found that the fifteen largest insurers are taking in more than double the amount in premiums that they accrued in 2000. Meanwhile, the report says, payouts have risen slightly more than 5 percent in aggregate during the same period.
Additionally, stock prices for three companies that deal almost exclusively with medical malpractice insurance â€“AP Capital, FPIC and ProAssurance â€“ doubled in the past three years, the study found.
In response to the findings, several state officials and consumer advocates condemned insurers for allegedly "price gouging" doctors. Connecticut Attorney General Richard Blumenthal accused the companies of profiteering, and Missouri Attorney General Jay Nixon said in a statement, "There is no excuse for malpractice insurers doubling their rates while their claims payments decrease."
Some companies are paying as little as 10 cents in claims for every dollar in premiums collected. According to the report, one firm, Lexington Insurance Company, a subsidiary of AIG, increased its premiums by 2200 percent while paying out just 14 cents on the dollar in claims since 2000.
The industry criticized the study for failing to take into account current underwriting costs, the Associated Press reports. Larry Smarr of the industry group Physician Insurers Association of America (PIAA) told the news outlet that companies collect premiums based on future cost projections.
But Angoffâ€™s study determined that insurers had regularly increased premiums at rates far exceeding the projected losses in each of the past four years, while trends in the study suggest no attendant future rise in claims. In addition to increasing premiums dramatically since 2000, the 15 companies studied expect to raise rates higher even as they project a drop in future claims payouts, the study found.
Last February, Smarr said that rising malpractice premiums were leading to a "growing crisis of access to the health care system for patients across the country." He told a February hearing of the House of Representativesâ€™ Small Business Committee that "increased premiums are caused by the ever-increasing size of medical liability insurance payments and awards" leading to "ever-escalating losses."