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How much did it hurt? St. Paul exits the medical liability market

It hurt a lot in some states. In others -- even where the nation's second-largest carrier insured a big percentage of physicians -- the pain barely registered.

By Tanya Albert, amednews staff. July 8/15, 2002.

It's been more than six months since executives of the St. Paul Companies told nearly 41,000 physicians that they were pulling out of the medical liability insurance market.

The company said it would cover physicians until their contracts ran out, giving some physicians plenty of time to come up with a new insurer and others just months.

The first wave of physicians has already finished its search for a new carrier. For some doctors, it was as simple as comparison shopping between insurers left in the state and choosing a new one.

But in states where a number of medical liability insurers have already pulled out of the volatile market or exited the business because they've gone bankrupt, there is little competition. For physicians there, finding medical liability coverage hasn't been easy.

Some doctors, faced with paying tens of thousands of dollars in tail coverage, decided to retire early. Younger doctors picked up and moved across state lines. Others have pulled together the money they need to pay for insurance for now, but are uncertain they'll be able to keep paying pricey rates in the future.

41,000 physicians were left scrambling for liability insurance when St. Paul exited the market.

At a different time, losing St. Paul may not have had a big impact. But smaller companies had been exiting the market for months. When St. Paul made its announcement in December 2001, it drew nationwide attention to liability crises in several states. Mainstream media -- local and national -- started to take note of the problems physicians were having finding insurance in some states, particularly West Virginia, Pennsylvania and Nevada.

"Clearly, as availability worsens and the prices go up, there is more pressure when another company leaves the market," said Richard F. Corlin, MD, American Medical Association immediate past president.

Here are the stories of how individual physicians abandoned by St. Paul are coping in key states.

Nevada

In a state where St. Paul was one of only a handful of companies offering insurance, one doctor decides to retire early. Another doctor moves to a practice in California.

For Las Vegas colon and rectal surgeon Joseph Thornton, MD, the decision to retire a few years early was a heart-wrenching one. But when he crunched the numbers, no other decision made sense.

Dr. Thornton turns 57 this year and planned on practicing for another three years. When he received notice that St. Paul would no longer insure him, he faced two scenarios.

Scenario number one: Pay about $70,000 for tail coverage from St. Paul to cover him for any lawsuits that could crop up for surgeries he did while he was insured by them. Then come up with another $100,000 to pay for new insurance. And, after retirement, pay another tail to the new insurance company, knowing there's always the possibility the new carrier could drop out of the market or drop his coverage.

Scenario number two: Retire now. Since he had been with St. Paul for six years, he wouldn't have to pay a dime for his tail coverage if he retired. (St. Paul paid for tail coverage for retiring physicians who had been with the company for at least five years.)

"Looking at it like that, I couldn't afford to work," said Dr. Thornton, who started practicing in Las Vegas in 1978. "They put me in a really difficult position."

His insurance expired March 31, and he kept exploring options until mid-March, hoping something would come along. It didn't.

The hardest part was telling his patients.

"I wasn't ready to quit," Dr. Thornton said. "It was like I planned my own funeral, said prayers over the casket and put it in the grave."

For younger physicians, retirement wasn't necessarily an option.

Many have talked about leaving the state, and obstetrician-gynecologist Cheryl Edwards, MD, did. She decided to change the focus of her practice and move across the state line from Las Vegas to Los Angeles, where medical liability insurance has been more available and rates have been more stable.

"It put me over the edge to make the move," she said.

Dr. Edwards realized she would have to give up her solo practice and join a group to continue to afford practicing in Nevada. She had a job offer, but she started to wonder what might happen if the group couldn't afford to pay for physicians' insurance. She ultimately chose to go to Los Angeles and try her hand at cosmetic gynecology, an area that she had been interested in before medical liability rates began rising.

Now, the Nevada group she had a job offer from is thinking about closing. "A lot of doctors have been calling to see what it is like down here," she said.

Pennsylvania

Without many insurers to choose from, doctors scramble to find coverage and hope they can afford the premiums.

Because they were losing money, medical liability insurance companies have been dropping out of Pennsylvania for more than a year. The state was one of the first in the nation to feel the medical liability crunch.

So when Langhorne, Pa., ob-gyn Neil Bluebond, DO, made the decision to go with St. Paul it was partially because he figured the company would always be around.

"Within two months of signing, they told us they weren't going to insure us anymore," said Dr. Bluebond, whose insurance with St. Paul ended May 31.

His practice, which includes seven other physicians, had been with the previous insurance company for six months before it left the market.

"It's a back-and-forth game we've been playing for a year and a half," said Dr. Bluebond, who has practiced in the state for 18 years. "It affects the patient-physician relationship."

His group had to stop accepting new obstetrics patients for a few weeks when it was unclear whether the practice would be able to get new insurance.

With St. Paul gone, there were even fewer options for physicians looking for insurance -- particularly physicians in high-risk specialties. The group does have a new policy and will continue to see patients, holding out hope that there will be tort reform on a national level that will stabilize the volatile market.

There is still an unsettling feeling that any insurance they can obtain will eventually become unaffordable.

"In an ideal world, there would be tort reform, and when malpractice occurs, it would be judged by physicians and lay people who understand medicine," Dr. Bluebond said. "Now it's which lawyer puts on a better show. It's harming our society."

Nebraska

Retired physicians carrying insurance for charity work faced big increases in their insurance bills, but with a little digging they found new companies offering affordable rates.

For at least a few weeks, it appeared as if retired physicians doing charity work in Nebraska were going to have to hang up their stethoscopes.

St. Paul had been insuring retired volunteer doctors for $100 a year.

"When they decided to get out, the lowest quote I could get initially was $1,550," said retired psychiatrist R. Dale Jones, MD.

Since Dr. Jones retired in 1995, he's spent one day a week volunteering at a homeless shelter in Omaha, prescribing medications and offering supportive psychotherapy. "I was faced with paying $1,550 or quitting," he said.

Dr. Jones contacted the office manager in his former office, and after some phone calls, she was able to find a better deal. MMIC was offering a $350 rate for retired physician volunteers.

That was a deal that Dr. Jones was able to accept, and he'll be able to continue his work.

"I enjoy seeing these folks," he said. "I hated to quit because they need the attention pretty badly."

Other retired physicians who faced the same dilemma have also found affordable insurance, said Nebraska Medical Assn. spokeswoman Lori Warner. And the transition has not been too rough for practicing physicians who were with St. Paul.

As St. Paul exited the market, COPIC Insurance Co. came into the area.

"The number of companies insuring in the state didn't go down," Warner said.

Arkansas and South Dakota

A large portion of physicians in these states carried St. Paul insurance, but healthy competition has made it relatively easy for physicians to find new insurers.

Of the markets where St. Paul insured physicians -- 49 states and the District of Columbia -- South Dakota had the highest percentage of physicians who carried insurance from the Minnesota-based company. Nebraska was second and Arkansas was third.

But despite the high concentrations in Arkansas and South Dakota, doctors haven't had a hard time finding new insurers to take them. The reason: Competition among insurers in those states is still strong.

"Compared to some states with one company writing, we were in good shape," said David Wroten, assistant executive vice president of the Arkansas Medical Society. "Of the people looking for coverage, the vast majority have found it."

ADDITIONAL INFORMATION:

Where St. Paul insured doctors

Just because St. Paul Companies insured a large percentage of physicians in a state didn't mean doctors there had the hardest time finding new insurance. In South Dakota -- where the highest percentage of physicians were insured by St. Paul -- there were plenty of companies left to chose from. But in New Jersey -- where the lowest percentage of doctors were insured by St. Paul -- physicians had a tougher time because other companies had pulled out of the market. Below is a list of the percentage of physicians Minnesota-based St. Paul insured in each state.

               Total      St. Paul    Percent
               doctors*   insured     insured
               --------   --------    -------
South Dakota     1,708     1,206       70.61 
Nebraska         4,300     1,932       44.93 
Arkansas         5,711     2,346       41.08 
North Dakota     1,063       419       39.42 
Utah             5,041     1,893       37.55 
Iowa             5,927     2,039       34.40 
Nevada           4,025     1,309       32.52 
West Virginia    4,442     1,270       28.59 
Louisiana       12,207     2,514       20.59 
Minnesota       14,257     2,740       19.22 
DC               4,488       563       12.54 
Colorado        11,692     1,443       12.34 
Delaware         2,099       249       11.86 
Kentucky         9,468     1,061       11.21 
Arizona         12,250     1,326       10.82 
Montana          2,188       230       10.51 
North Carolina  21,118     2,145       10.16 
Maine            3,598       322        8.95 
South Carolina   9,689       841        8.68 
Mississippi      5,399       420        7.78 
Indiana         13,461     1,026        7.62 
Illinois        35,943     2,679        7.45 
Missouri        14,061       952        6.77 
Virginia        20,362     1,354        6.65 
Kansas           6,486       372        5.74 
Pennsylvania    39,603     2,264        5.72 
Alabama          9,887       460        4.65 
Tennessee       15,360       584        3.80 
Wisconsin       13,954       387        2.77 
New Hampshire    3,438        93        2.71 
Hawaii           3,887       103        2.65 
Ohio            30,229       703        2.33 
Connecticut     13,279       272        2.05 
Florida         46,013       788        1.71 
Wyoming          1,013        16        1.58 
Texas           46,904       590        1.26 
Massachusetts   28,886       337        1.17 
Rhode Island     3,814        41        1.07 
Michigan        25,209       234        0.93 
Vermont          2,318        21        0.91 
Oklahoma         6,565        41        0.62 
Idaho            2,370        14        0.59 
California      97,213       548        0.56 
Washington      16,693        92        0.55 
Oregon           9,312        46        0.49 
New York        78,524       310        0.39 
New Mexico       4,565        14        0.31 
Maryland        23,449        54        0.23 
Alaska           1,362         3        0.22 
New Jersey      27,462        56        0.20 
------------   -------    ------       ----- 
U.S. total     782,292    40,722        5.21

* Includes all physicians, not just practicing physicians

Sources: American Medical Association and St. Paul Companies