Undermining a talking point of organized medicine about tort reform, premiums for medical malpractice insurance for 3 bellwether specialties dropped for the fifth straight year in 2012, according to a new report published in Medical Liability Monitor (MLM).
The American Medical Association and other medical societies have argued that a broken medical liability system boosts insurance premiums for physicians. However, rates for obstetrician/gynecologists, general internists, and general surgeons decreased on average by 1.7% in 2012, following declines of 0.2% in 2011, 0.5% in 2010, 2.5% in 2009, and 4% in 2008, according to MLM's annual rate survey, which was released today. These declines, however, are dwarfed by annual premium increases topping 20% in 2003 and 2004.
One reason why malpractice insurers can afford to charge less and still reap handsome profits, survey article author and actuary Chad Karls stated, is a drop in malpractice claims per physician. "The industry's claims frequency is now approximately half of what it was a decade ago," according to Karls, a consulting actuary at a company called Milliman.
A dampening influence on claims frequency, and therefore premiums, is the caps on noneconomic (pain and suffering) damages that many states have enacted in recent years, Karls told Medscape Medical News. Proponents of such limits say that the caps reduce the number of frivolous lawsuits and excessive jury awards.
"I believe tort reform is a contributing factor, but it is not the sole reason," said Karls. "We've seen a fall-off in claims frequency in states with tort reform and states without tort reform."
MLM collects and analyzes malpractice insurance rates charged by multiple insurance carriers in markets as big as a state and as small as a single county. It 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 in the MLM survey, effective as of July 1, do not reflect credits, debits, or other factors that can raise or lower premiums. Karls noted that the increasing use of credits by insurers to encourage the use of electronic health records and other behaviors considered risk-lowering could be pushing rates substantially lower.
Of the hundreds of 2012 premium rates reported to MLM, 59.2% remained the same from 2011, 25.7% decreased, and 15.1% increased. "Rate declines...were generally more severe than rate increases," Karls stated in the report, noting that this has been the trend since 2006.
14-Fold Difference for Internists in Miami, Twin Cities
The MLM report does not provide average or median premium rates for any individual specialty. What can be discerned in the hundreds of rates, however, are the outliers.
The highest rate for a $1 million/$3 million policy for internists turned up in Miami-Dade County, Florida, where First Professionals Insurance (FPIC) quoted $47,731. In contrast, ProAssurance Wisconsin Insurance quoted a mere $3375 for Minnesota internists, the nation's lowest rate for that field.
The highest annual premium for obstetrician-gynecologists was $204,684, quoted by Physicians' Reciprocal Insurers in the New York counties of Nassau and Suffolk on Long Island. The Cooperative of American Physicians (CAP) offered the lowest rate for obstetrician-gynecologists, at $15,484, in mid-California. Only members of CAP can purchase coverage through the group's insurance subsidiary, and CAP dues are $440 a year. Even when dues were added to the quoted premium, however, CAP still had the least expensive coverage for obstetrician-gynecologists.
Malpractice insurance quotes for general surgeons ranged from a high of $190,926 from FPIC in Miami-Dade County to a low of $11,306 from ProAssurance in Minnesota.
Rate Increases Are Years Away
The continuing decline in premiums signifies a "soft market," in insurance industry parlance. The market will remain soft until rates become so low in relation to expenses — namely, paid claims and defense costs — that malpractice insurance carriers see their profits shrink.
Karls told Medscape Medical News that it will take several years of weaker financial results before the market "hardens" and carriers begin to jack up their rates. "One year does not make a trend," he noted.