Caps on noneconomic damages have effectively slowed growth in medical malpractice payouts, but malpractice insurers are not passing all of the savings on to doctors, according to a new study by Weiss Ratings.
The study, which the Palm Beach Gardens, Fla.-based company released Monday, finds that carriers in states with caps actually implemented higher rate increases than in states without caps.
As Congress and state legislatures fiercely debate bills for more caps, the Weiss findings document their effectiveness, but perhaps only when accompanied by regulations of premium increases.
The malpractice insurance industry, however, vehemently disputes the methodology of the company, which normally rates the financial health of more than 16,000 financial institutions.
Studying 19 states with caps, Weiss says it found that from 1991 to 2002, the median malpractice payout rose 37.8%, compared with a rise of 71.3% in states with no caps.
However, Weiss says it found that states with caps saw an average 48.2% jump in median premiums, compared with an average 35.9% increase in states without caps.
"Although the implementation of non-economic caps has resulted in a slowdown in payout increases for insurers, most insurers have not passed those savings on to physicians," Weiss says in a release. "Thus, caps have been ineffective in reducing medical malpractice premiums for medical professionals."
Weiss recommends that lawmakers "should put all proposals for non-economic damage caps on hold until convincing evidence can be produced to demonstrate a true benefit to doctors in the form of reduced med mal costs."
Meanwhile, Weiss adds, lawmakers should tighten regulations for insurers, and "the medical profession must assume more responsibility for policing itself."
But Lawrence Smarr, president of the Physician Insurers Association of America, which represents 56 physician-owned carriers covering almost two-thirds of the med mal marketplace, says Weiss' methodology appears to inflate carriers' increases.
For example, Smarr says that when Weiss determined average rates in a state, the company appeared to give the same weight to a carrier with the highest rate, which in all probability has the lowest market share, as it gave to the carrier with lower rates and the highest market share.
Also, Smarr says Weiss did not account for discounts that insurers give physicians who implement risk management programs and other measures.
He adds that insurers often hold off changing rates after a cap is passed because it could be struck down in the courts, as happened twice in Illinois, for example.
Even so, First Professional Insurance Company, a PIAA member, promised Florida Gov. Jeb Bush on Monday that it would lower its average rate by 20% if the state passes a $250,000 cap on noneconomic damages.