After remaining flat for more than a decade, medical malpractice insurance premiums are on the rise again.
A recent AMA study shows that the average annual premium went up 18% to $16,800 per self-employed physician nationwide in 1998, the most recent year available. Average annual liability insurance costs had not topped $15,500 since 1989.
Anecdotal evidence suggests that rates have continued to escalate. The increases are modest in some areas, but physicians in certain parts of the country really are feeling the pinch. It does not help that physician income has fallen just about everywhere as healthcare payers have pared down reimbursements to providers.
In Pennsylvania, professional liability insurance rates for physicians went up by an average of about 15% in 2000, though some specialists were hit with hikes of 40% or more, according to Ed Wrobel, a consulting actuary with Simsbury, Conn.-based consultants Tillinghast-Towers Perrin.
The struggle is so pronounced that the Pennsylvania Medical Society held forums with physicians in six cities across the state last month to gauge the extent of the problem. "Many (practices) are deferring the purchase of new equipment and hiring new staff and some are even downsizing," says spokesperson Chuck Moran.
He says that about a third of the practices represented at the meetings reported difficulties recruiting physicians from out of state because of the high cost of liability insurance. A number of physicians in the Philadelphia and Pittsburgh areas have retired early or moved their practices elsewhere for similar reasons, Moran says.
The Medical Society of the State of New York reports 20% increases in premiums this fiscal year for dermatologists who perform surgery, pathologists and specialists in emergency medicine in the New York City boroughs of the Bronx, Brooklyn, Queens and Staten Island.
One culprit is the cyclical nature of the insurance business. "There needs to be some correction
in the market" after years of relatively low premiums, says Judy Hart, vice president and marketing leader of GE Employers Reinsurance Corp., an Overland Park Kan.-based insurer of 60,000 physicians and dentists.
But there's another factor that has practitioners and insurers worried: something Hart calls a "lottery mentality" among some plaintiffs. "We are seeing large malpractice claims in just about every state," she says. A recent $19 million judgment in the managed care-friendly environment of Louisville, Ky., raised some eyebrows.
Not coincidentally, New York and Pennsylvania, where liability insurance costs are skyrocketing, lead the nation in damages awarded for malpractice. Philadelphia courts returned separate verdicts against individual doctors of $100 million, $55 million and $49.6 million last year alone and another of $47 million last month.
"Countrywide, we are seeing that the average claim size is on the rise," Wrobel says. "But we do seem to have a particularly severe problem in Pennsylvania."
Rep. Patrick Toomey (R-Pa.) introduced national tort-reform legislation last fall, calling for a $250,000 cap on punitive damages in malpractice cases and a three-year statute of limitations on civil suits against healthcare providers.
Congress has not made a serious effort on medical tort reform since 1996, and lukewarm support in the Senate makes passage unlikely anytime soon.
Still, at least one insurer in New York sees little reason for alarm. "As far as we're concerned, the rates have plateaued," says Jeanne Pores, senior vice president of Physician's Reciprocal Insurers of Manhasset, N.Y. She notes that OB/GYNs in the state have had to cope with six-figure annual premiums for nearly 10 years. The average OB/GYN made about $240,000 last year, according to the American Medical Group Association.
Just to be sure, though, PRI, which covers more than 8,000 physicians in New York state, offers a 5% discount for physicians who complete a risk management course. This, Pores says, teaches providers to reduce their personal risks within the framework of managed care.
Premiums actually might be higher if not for healthy competition among insurers. But Jeffrey Combs, executive vice president of St. Louis-based insurance brokerage Arthur J. Gallagher & Co., predicts a shakeout in the next two to three years. "The number of insurance companies that are willing to provide (medical liability) coverage has been shrinking" because firms hit with massive claims have stopped writing new policies, he says.
He believes that there are enough regional companies out there to provide liability coverage even if others disappear. "There is availability of insurance. It's just a matter of what it's going to cost." Premiums may be on the rise, but, Combs says, "I don't think it's a catastrophe."