MEDICAL MALPRACTICE INSURANCE CRISIS

Over the past 12 months rates have skyrocketed in Florida and we can identify at least 10 companies previously writing coverage that have left the state. Some of those companies are in receivership. Neurosurgeons, obstetricians and other high-risk specialists were the hardest hit. There are only 5 preferred carriers left writing coverage. Companies are picking and choosing applications very carefully. Some carriers report upwards of 500 new applications weekly.

Analysts don't expect any market improvements in 2002 or 2003. Everything that is causing this is still in effect.

WHAT'S CAUSING THIS CRISIS?

More than 70 percent of malpractice suits are either won by physicians, dismissed, or dropped. When cases go to trial, physicians prevail 80 percent of the time. Sympathy for plaintiffs is playing an increasing role in the size of malpractice awards. Some jurors freely admit that they'll overlook whether the doctor violated the standard of care if they feel sorry for the plaintiff.

Median jury awards in malpractice cases rose 76% between 1996 and 1999 to $800,000, according to Jury Verdict Research of Horsham, PA. Million dollar awards have increased significantly in the last few years. Million dollar awards know account for 6 percent of all malpractice awards.

Some argue that stock market losses are the real driver of price increases, since insurance companies use those funds to offset higher premium rates. As income from investments decreases, however, premiums must more closely match losses. It is also argued that insurance companies should have raised rates sooner. There may some truth to this, but it is difficult to understand how having today's high rates earlier would make them more palatable.

Finally, September 11, 2001, caused reinsurers billions of dollars in losses. These same reinsurers also reinsure medical malpractice insurance companies. They have increased the premiums they charge to medical malpractice insurance companies.

SOLUTION?

Many say the answer is tort reform. Limiting non-economic damages to say $250,000 or $350,000. States with these limits on non-economic damages have average combined highest increases of 12-15%, compared to 44% in states without caps on non-economic damages. California has more than 25 yrs of experience with this reform. It is a success.
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