PROFESSIONCautious optimism greets second year of stable, lower liability premiumsDoctors warn that insurance rates are still extremely high in some areas and that courts could overturn recent tort reforms.By Amy Lynn Sorrel, AMNews staff. Dec. 17, 2007. For the second straight year, medical liability insurance rates are easing nationwide, with nearly 84% of company-reported rates holding steady or dropping in 2007. That's according to the latest Medical Liability Monitor survey, the largest of its kind to track how much insurance carriers charge physicians. The report showed that more than half of premiums -- 53% -- did not change. That's up from 47% of companies reporting that result in 2006. Another 31% of rates inched downward -- 34% more than last year and roughly triple the number of decreases in 2005. While those signs show things are looking up, doctors and insurance executives were quick to note that they are not out of the woods just yet, because premiums in many areas of the country remain sky-high. "The good news is the cliff you are dangling from is two feet lower. The bad news is it's still a 200-foot drop," said American Medical Association Board of Trustees member Robert M. Wah, MD. For instance, Illinois physicians in 2007 saw some of the largest double-digit rate decreases at around 50%. But some internists, general surgeons and ob-gyns in Cook County still pay among the highest rates in the nation at $50,464, $127,083 and $178,291, respectively. Florida had the highest rates in those three specialties. Some general surgeons and ob-gyns there spent $275,466 in 2007, also despite cuts. The Monitor asked major carriers to report their manual rates as of July 1 for mature claims-made policies with limits of $1 million/$3 million for the three specialties. But increases are slowing, giving doctors some repose, Dr. Wah said. The percentage of rate hikes in 2007, at 16.2%, was almost half the 30.5% figure reported in 2006. Insurers noted an overall drop in the frequency of lawsuit filings as a main factor in keeping rates stable or lower. Barring any major changes in that trend, no firms responding to the Monitor believed "significant" increases would be necessary in the near future, consistent with last year's responses. Guarded hopeIn addition to premiums still being so high, doctors and industry experts have caution flags up for other reasons as well. "What keeps me awake at night is what we perceive to be an increasing number of large claims," said James D. Hurley, a medical liability consultant with the global actuarial firm, Towers Perrin, and editor of the Monitor's 2007 survey results.
An Illinois trial court struck down the state's $500,000 malpractice award cap.
Litigation expenses also are on the rise, he added. The decline in claims appears to be counterbalancing severity and defense outlays for now, Hurley noted. Should claims costs outpace the frequency trend, however, it could pressure insurers to raise rates to keep up, he warned. The dependability of tort reform also remains a question mark in insurers' minds. Survey respondents generally agreed that no new significant reforms passed in 2007. None expressed faith in the prospects for federal reform, compared with one respondent who did so in 2006. A single major shake-up this year in Illinois has the state's $500,000 award limit hanging in the balance. A trial court on Nov. 13 struck down the 2005 cap as unconstitutional. The challenge now heads to the state Supreme Court for a final say. "We are starting to see signs that [reforms] are going to make a difference," said Harold L. Jensen, MD, chair of Illinois' largest medical liability carrier, ISMIE Mutual Insurance Co. The company has reduced its rates by 5% overall since 2005, due to what Dr. Jensen called a "halo effect" of the legal measures. Other Illinois companies posted double-digit reductions in 2007, the Monitor data showed. "But if the cap disappears, all that does, too." Some states making tort reform workStill, doctors and insurers said the survey results show tort reform's trail of success, with the most prominently defined path leading to Texas. Voters in 2003 passed a $250,000 noneconomic damage cap as a constitutional amendment, making a judicial challenge difficult. Monitor data showed the state posted some of the lowest rates in the country for ob-gyns in 2007, as some insurers there continued with cuts for the third consecutive year. Elsewhere, despite their reluctance to drastically change rates, more insurers are helping to reduce doctors' premiums through rebates or credits, which generally are not reflected in their reported rates.
Texas has some of the country's lowest liability premiums for ob-gyns.
"So there is other good news out there," said Lawrence E. Smarr, president of the Physician Insurers Assn. of America, a trade group of doctor-owned medical liability companies. About 15% of Monitor survey respondents said they introduced new credits to policy holders in 2007. All but one firm said they were "monitoring" use of such discounts. For example, The Doctors Company in July issued rebates that translated into a 7.5% rate reduction for some physicians in California, Colorado, Florida, Georgia, North Carolina, Ohio, Texas, Virginia, Washington and Wyoming. Increased competition also is helping keep premiums in check, experts said. Twenty-five percent of insurers responding to the Monitor indicated that they are entering new markets. Every company said it was open for new business, a change from 2006 when 10% of companies imposed moratoriums on new policies. ADDITIONAL INFORMATION:Location, location, locationGeography continues to be a big factor in determining doctors' premiums. Below is a summary of the lowest and highest individual-company reported rates for three specialties as of July 1. The rankings are listed by city, county or state and do not reflect an average of all rates reported for that specialty in that state. Insurers' data are based on manual rates for specific mature claims-made policies with limits of $1 million/$3 million.
Source: Medical Liability Monitor 2007 Rate Surveycq An improving picture?The number of stable medical liability rates has steadily risen over the past five years, while the number of premium cuts has nearly tripled since 2005. Percentage of liability rate changes by range:
Note: Percentages may not total 100% due to rounding. Source: Medical Liability Monitor, 2007 Rate Survey Additional good newsMany insurance companies issued credits and rebates to policyholders in 2007. Although not reflected in the data Medical Liability Monitor collected, these moves also helped reduce doctors' premiums. Some examples: The Doctors CompanyBeginning July 1, the national physician-owned insurer issued dividends to its insureds in 10 states that resulted in an average 7.5% premium reduction. Connecticut Medical Insurance Co.The company issued credits in the 2007 policy year ranging from 7.5% to 25% to eligible doctors covered by the company for at least five consecutive years. It recently increased those discounts by 10% to 30% for 2008. ISMIE Mutual Insurance Co.The insurer approved an $18.4 million dividend payment to insured doctors continuously covered in the 2005-06 policy year. It planned to distribute the money annually over four years, starting with a $5.5 million overall credit in July. Texas Medical Liability TrustDoctors renewing policies in 2008 will receive a credit equal to 22% of their expiring premiums that will apply to next year's policy. Medical Assurance Co. of MississippiExecutives said the insurer, at a Dec. 5 meeting, was likely to have approved a credit equal to 20% of policyholders' 2007 premiums. At press time in early December, no date was set for the refund to take effect. Copyright 2007 American Medical Association. All rights reserved.
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