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Professional liability insurance rates go up, up; doctors go away

High-risk specialists were the hardest hit in 2001, forcing some to drop services. The market isn't looking much better this year.

By Tanya Albert and Damon Adams, amednews staff. Jan. 7, 2002.

After more than a decade of fairly stable rates for professional liability insurance, physicians saw costs increase in 2001. And in some areas of the country, premiums soared to unaffordable levels.

Eight states saw two or more liability insurers raise rates by at least 30% last year, according to an AMNews analysis of records from insurance departments in the 50 states and the District of Columbia, and medical liability insurers. Physicians in more than a dozen states saw one or more insurers take a 25% or higher rate increase, according to the analysis.

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Location, location, location
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And that does not factor in increases some physicians have been hit with when carriers changed the criteria used to offer discounts, such as increasing the number of years a physician has to go without a claim to receive a discount on premiums.

Neurosurgeons, obstetricians and other high-risk specialists were the hardest hit in 2001. In some cases, physicians in traditionally high-risk specialties -- even those without a track record of lawsuits -- could not find an insurance company willing to provide coverage. The St. Paul Companies, which insures doctors in 45 states, announced late in 2001 that it no longer would write medical liability policies. It plans to phase out coverage as physicians' contracts expire over the next 18 to 24 months.

Analysts don't expect any market improvements in 2002 or 2003. "Without some kind of change, it's not going to get any better," said Joe Luchok, spokesman for the Health Insurance Assn. of America. "Everything that is causing this is still in effect."

"This is another medical liability crisis," added Donald J. Palmisano, MD, American Medical Association secretary-treasurer and trustee. "We have to make sure that rates are reasonable."

Eight states saw two or more liability insurers raise rates at least 30% last year.

But there is significant debate about how to ensure reasonable rates. Some state medical societies are pushing various tort reforms, but trial lawyers are championing reforms aimed at improving patient safety.

Everyone seems to agree, however, that rising insurance rates eventually could mean that patients across the country no longer will have easy access to medical care.

If rates aren't affordable, doctors completing residencies in expensive areas will go elsewhere, and physicians already in the market will retire early or leave it, Dr. Palmisano said.

Trouble spots

Some stories of physicians altering their practices in the wake of rising rates are already emerging.

The "hardening" insurance market forced physicians in West Virginia to close their doors because they couldn't afford their insurance bills.

Some family physicians in Mississippi, Florida, Pennsylvania and Texas have stopped offering obstetrics care, so their premiums will be lower.

The phase out will continue for the next 18 to 24 months.

In Ohio, the state medical association president sent a letter to Gov. Bob Taft asking him to consider appointing a special task force to study the problem and recommend solutions.

Cleveland, Miss., family physician Scott Nelson, MD, fears that if his state Legislature doesn't enact tort reform, patients could find it very difficult to get care. Mississippi has seen a large increase in the number of lawsuits filed and an increase in jury awards. During the past six years, Mississippi juries have awarded $1 million or more in 100 cases. They had done that fewer than 50 times between 1817 and 1995.

That's having an impact on some physicians in the state.

Until last year, Dr. Nelson was one of six obstetricians practicing in a part of the Mississippi Delta around Cleveland. Since Oct. 1, 2001, that number has dropped to three. Dr. Nelson was among those who stopped delivering babies this fall because obstetrics insurance would have cost him more than $100,000.

"Patients are going to have to wait longer to see doctors," he said. "The doctors that are left right now are going to have an excessive load."

Obstetrics patients accounted for 30% of Dr. Nelson's practice. He said it would be one thing to give up obstetrics because he was tired of it, but it is another when it is one of his favorite parts of practicing medicine.

"I'm standing ready, willing and able in a part of the country that is underserved, and I can't provide the care because I can't afford the insurance," Dr. Nelson said. "We've got a real mess on our hands."

According to the analysis, some of the largest premium increases in 2001 were seen in Texas, Pennsylvania, Nevada, Ohio and Mississippi.

St. Paul levied a 65% increase in several states, including Mississippi. PHICO took an 83% increase in Texas. In Nevada, physicians in the Las Vegas area took the brunt of the increases, with two of the three largest companies in that area of the state taking large increases last year. One company took a 52% increase, and the other took a 70% increase.

Higher, wider

An annual survey by the newsletter Medical Liability Monitor found that insurance rate increases for 2001 were more widespread and larger than in 2000. The average increase for internists and general surgeons last year was about 10% while there was about a 9% increase for ob-gyns.

But some general surgeons saw rates increase as much as 86%, and internists' rates went up as much as 69%, the survey said. Premiums are substantial in Illinois and Ohio, particularly in Chicago and Cleveland. In South Florida, ob-gyns may pay as much as $208,949 annually.

There were few rate cuts in 2001. NORCAL and SCPIE Indemnity reduced rates in some parts of California. Ob-gyns saw modest reductions in Alabama, Colorado and Michigan, according to the Medical Liability Monitor.

Although the number of malpractice lawsuits has remained steady, the average jury awards in Oregon, Pennsylvania, West Virginia and Texas have been among the highest.

Some insurers have responded with rate hikes.

"The rate increases are needed because losses justify it," said Ron Neupauer, vice president of Medical Insurance Exchange of California, which insures in California, Alaska, Hawaii, Idaho and Nevada.

We've seen this before

This isn't the first time that physicians have had to manage rising costs. When physicians faced a medical liability crisis in the mid-1970s, states such as California turned to caps on noneconomic damages that juries awarded.

Other states passed laws setting standards for medical expert witnesses and establishing certain requirements for filing a medical malpractice lawsuit in the state or a particular county within the state.

Legislatures in both Pennsylvania and West Virginia were considering bills late in 2001. Mississippi expects to have several bills introduced to its Legislature in January that would put a cap on economic damages, control where lawsuits can be filed so plaintiffs can't jury shop and set standards for expert witness testimony.

The Florida Medical Assn. put together a legislative proposal for this year.

In Texas, the House of Representatives' insurance committee is studying the issue so it will be ready to address it when they meet next in 2003.

"From a public policy standpoint, it is a swamp," said Kim Ross, the Texas Medical Assn.'s vice president for public policy. "There is no easy way out."

Doctors should not expect the situation to improve anytime soon.

In recent years, a competitive market drove down prices below costs, insurers said. But companies are now adjusting those rates, and that translates into increases.

"The pricing was just too low. If you're losing money, you have to correct it," said Donald J. Zuk, president and CEO of SCPIE Holdings, which insures doctors in California, Florida, Texas, Connecticut, Georgia, Kentucky and West Virginia.

"One of the problems that the physicians have to realize is it's not going to get better for them. It's going to get worse because the premiums were artificially low," Zuk said.

The terrorist attacks of Sept. 11, 2001, and a struggling stock market hurt insurers by diminishing their investment returns, said Carol Brierly Golin, Medical Liability Monitor editor and publisher.

Golin said the medical liability market will continue to harden for at least two more years.

"There's no question that doctors will continue to see their rates continue to go up," she said. "It's going to take another year or two before insurers get their financial feet back on solid ground, unless they have been pricing appropriately over the last few years."

That has physicians worried.

"We are kind of afraid that we are not going to be able to pay these rate increases," said Arthur Palamara, MD, vice president of the Florida Medical Assn.

As carriers such as St. Paul exit the market and other carriers become more selective in which physicians they are willing to insure, physicians also worry about having access to any affordable insurance at all.

And short-term predictions are discouraging.

George Dale, Mississippi's insurance commissioner for 26 years, said doctors should expect a bumpy journey. "You might as well fasten your seat belts because there is turbulence ahead."

ADDITIONAL INFORMATION:

Premium price

The ups ...

In 2001, physicians in eight states saw two or more medical liability insurers raise rates by 30% or more:

Arkansas
Connecticut
Illinois
Nevada
North Carolina
Ohio
Pennsylvania
Texas

... and the downs

A handful of physicians did see rates decrease in 2001. A sampling of states where some doctors saw decreases between 8% and 4%:

Colorado
Louisiana
Michigan
New York

Sources: State departments of insurance, state medical societies and individual insurance companies

Location, location, location

Here's an example of how physicians in the same specialty insured by the same company can pay dramatically different premiums, depending on where they live. Yearly Medical Assurance premiums in two states:

Alabama                      Prior      2001    Increase
-------                     -------   -------   --------
Family practice (no OB)      $6,093    $8,269      36%  
Family practice (with OB)   $21,996   $29,527      34%  
Obstetrics-gynecology       $38,957   $46,016      18%  
Internists                   $6,093    $8,269      36%  
General surgery             $25,080   $33,648      34%

West Virginia                Prior      2001    Increase
-------------               -------   -------   --------
Family practice (no OB)     $15,675   $18,460      18%  
Family practice (with OB)   $53,887   $63,660      18%  
Ob-gyn                      $76,814   $90,779      18%  
Internists                  $15,675   $18,460      18%  
General surgery             $53,887   $63,660      18%

Source: Medical Assurance Inc.

Doctor-owned insurers raising rates too

When commercial insurers hiked medical liability insurance rates during the 1970s, some physicians responded by starting insurance companies through their medical societies.

These physician-owned companies were seen as a way to combat rising premiums and offer coverage to doctors who could not get it through other insurers. Today, there are about 40 doctor-owned insurance companies, and they insure about 60% of practicing doctors, according to the Physician Insurers Assn. of America, an organization representing such companies.

But like commercial insurers, some of these companies increased rates for 2001 and 2002 as the market adjusted from a competitive climate that drove prices down to one in which insurers raised premiums or pulled out of some areas.

"There's no end in sight to [rising rates]," said PIAA president Larry Smarr. "The crisis is being felt by doctors everywhere."

Minnesota physicians in 1980 started Midwest Medical Insurance Co. to offer cost-effective liability insurance. Midwest now insures about 10,000 doctors in Minnesota, Iowa, Nebraska, South Dakota, North Dakota, Illinois and Wisconsin.

In Minnesota, the company is raising rates 8% for 2002, the first increase in six years, a company spokeswoman said.

"The dollar value of claims is going up," said Paul Sanders, MD, Midwest board member and CEO of the Minnesota Medical Assn.

Medical Insurance Exchange of California did not increase rates in 2001, said Ron Neupauer, vice president of the company, which was started in 1975 by doctors in California. MIEC now covers 6,000 physicians and other health care professionals in California, Hawaii, Alaska, Idaho and Nevada.

But in 2002, the company is raising rates 5% in Hawaii, and parts of California likely also will see increases, Neupauer said.

Regardless of rate increases, some doctors feel more comfortable using physician-owned companies than commercial insurers.

"The doctor companies are pretty much where it's at for many of the doctors," said Carol Brierly Golin, editor and publisher of Medical Liability Monitor.

House weighs two approaches to liability insurance crisis

There hasn't been any action yet, but two competing national medical malpractice bills were introduced in the U.S. House of Representatives in the first half of 2001.

Both bills come from Pennsylvania representatives, where medical liability insurance rates have soared in the Philadelphia area.

If medical liability insurance rates are unaffordable, it is feared that physicians will leave the state or stop providing certain services, leaving patients without access to physicians, particularly specialists.

Both bills were referred to the House Judiciary Committee and the Energy and Commerce Committee's subcommittee on health. Neither has moved out of committee.

Rep. James C. Greenwood (R, Pa.) introduced the Medical Malpractice Rx Act, HR 2103, to prevent excessive and frivolous litigation.

His bill calls for establishing a set statute of limitations. Patients or their families wouldn't be allowed to bring a lawsuit after a two-year period that would begin on the day when the alleged injury was discovered or should reasonably have been discovered.

The bill also calls for capping noneconomic damages at $500,000, making the defendant responsible only for the portion of damages attributable to him or her and allowing a person to pay future damages over time rather than in one lump sum.

Rep. Patrick J. Toomey, (R, Pa.) in April 2001 introduced the Common Sense Medical Malpractice Reform Act of 2001, HR 1639. It calls for an alternative dispute resolution procedure for all health care liability lawsuits so that frivolous lawsuits could be avoided.

It also calls for capping noneconomic damages at $250,000 and giving patients one year from the date an injury occurred to file a lawsuit.