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Physicians feel double-digit pain as liability rates continue to rise

Some doctors are seeing bigger bills than reflected in the raw numbers as companies continue to eliminate discounts and tighten underwriting.

By Tanya Albert, amednews staff. Nov. 10, 2003.

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Internists, general surgeons and obstetrician-gynecologists in the Miami area are paying the highest professional liability insurance rates for those specialties in the nation, according to a new report.

The next highest rates for those specialties are found in Michigan, Illinois, Texas and Pennsylvania.

Nationwide, rates are on the rise. More than half of the internists, general surgeons and ob-gyns out there -- 58.2% to be exact -- saw double-digit insurance rate increases of 10% to 49% between 2002 and 2003.

Slightly more than 1% of those specialists saw increases of 100% or more.

But there is some good news: 22.6% of physicians in those three specialties saw no increase, and some saw a decrease in rates over the past year.

The lowest rates in the nation for internists, general surgeons and ob-gyns are in Idaho, Minnesota, Nebraska, South Dakota and Richmond, Va.

This is according to the latest state of the union for medical liability insurance rates from "2003 Rate Survey" by the Medical Liability Monitor. The data, which the monthly newsletter has collected annually since 1991, are based on 641 rates insurance companies reported that can be compared with 2002 data. Companies report their mature claims-made manual rates in effect July 1 with $1 million/$3 million limits.

The information collected from 40 insurance companies provides the most comprehensive look at the amount physicians are paying for their insurance. The report also offers a glimpse at what doctors can expect in the coming year. And 2004 doesn't look to be much better than its most recent predecessors. About 83% of the companies surveyed believe they will need additional large increases next year, according to the report. Many of those companies believe those increases will be in the double digits although they hope they won't be as high as they have been in recent years.

"The rate survey shows what we expected," said Larry Smarr, president of the Physician Insurers Assn. of America. "And I agree with the headline [on the report] 'No end in sight.' "

Rates will continue to rise because they are based on losses that companies pay out, and right now that number is rising 7% annually, he said. On top of that, low interest rates force insurers to collect more money through premiums.

But raw numbers don't tell the whole story, Medical Liability Monitor editor Barbara Dillard said.

More expensive, harder to get

In addition to increases in rates, physicians are seeing fewer discounts than they once did.

"Discounts for risk management have gone away," Smarr said. So too have dividends that physician-owned companies historically have offered doctors to help offset premiums.

The Medical Liability Monitor survey also notes that companies are increasingly requiring physicians to buy tail coverage that may once have been included in premiums and that some companies are limiting corporate coverage.

"All of these things mean that a bill that an individual doctor is getting this year may be an even bigger increase for him than it looks on the rate survey," Dillard said.

In addition, physicians are finding it more difficult to find insurance.

In all, 14 companies who responded to the survey said they withdrew or severely restricted new writings in some states. And companies that are staying in the market are continuing to restrict who they will cover.

According to the Monitor's survey of 40 companies:

• 73.5% said they are tightening their underwriting.
• 48.6% said they are not renewing more physicians than they did last year.
• 20% said they are restricting coverage in one form or another, such as no longer covering punitive damages.

As rates keep rising and insurance becomes harder to find, physicians and insurers continue to push their state legislatures and Congress to enact tort reform that includes a $250,000 noneconomic damages cap. This, they believe, will help stabilize insurance rates.

The survey showed states without noneconomic damages caps generally saw larger rate increases than states with caps. For example, ob-gyns, internists and general surgeons in Pennsylvania saw a 25.8% to 73% increase in rates; those specialists in Illinois saw a 25% to 50% increase and New York physicians saw a 7.3% to 12.7% hike.

In states with caps, Indiana and Louisiana physicians saw a 3.9% to 21.8% increase and Colorado physicians saw a 12.7% to 38% increase, the survey showed. Some Wisconsin physicians saw as much as a 12.7% increase, but some saw a 14.2% decrease. Wisconsin adopted reforms, including a patient compensation fund, in 1975. It added a $350,000 adjustable noneconomic damages cap in 1995 that now stands at $410,000.

"We had the foresight to do something for the people and they look after us," said Ft. Atkinson, Wis., orthopedic surgeon Walter Moritz, MD, who helped craft the original Wisconsin legislation and is vice chair of the state's patient compensation fund. "It's fantastic to be in Wisconsin and practicing medicine."

The medical community looks toward California tort reform as the gold standard when trying to get laws passed elsewhere. Some California doctors in the three specialties on which the survey focused saw no increase in rates between 2002 and 2003, but some saw as much as a 54% hike in one year.

Even so, California physicians still pay significantly less than counterparts in other states. For example, internists in Dade County, Fla., paid 133.7% more for their insurance than internists in Los Angeles, according to the survey. General surgeons in Dade County paid 285.1% more than their counterparts in Los Angeles and ob-gyns in Dade County paid 220.2% more than ob-gyns in Los Angeles.

At the state and federal levels, "we need tort reform," Smarr said.

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