With our state legislature in session, the medical liability crisis in Georgia continues to be important. In an article last month, I discussed the basics of the crisis, and this month’s article is a continuation of information.
Tort reform opponents say to “fix” the medical liability insurance crisis you must institute greater insurance regulation by requiring stricter and more detailed filing requirements by malpractice insurers and require closer oversight by the Department of Insurance in connection with the raising and lowering of premiums. By law, every property/casualty insurance company must file an Annual Statement with the Georgia Insurance Department. This 192-page document requires complete and comprehensive data and information on every aspect of the insurance company’s operations.
In addition, every filing with the Department requesting a rate change – up or down – must be accompanied by complete, detailed actuarial support which analyzes losses, expenses and profits. The Department carefully scrutinizes all rate filings before they approve, deny or modify them. The Department regularly demands an independent actuarial analysis of the filing and rate request (which the insurer pays for) before it rules. The Department may call a public hearing on the matter.
Finally, the Georgia Consumers’ Insurance Advocate receives copies of all rate filings and documentation, and it, too, carefully reviews each filing and may object. In 2000, St. Paul Insurance Company announced its withdrawal from the State of Georgia because the Insurance Commissioner refused its rate request.
It is also important to note that Georgia’s medical liability market is less vulnerable to the profit motive than many other states. The state’s largest writer of medical liability insurance for physicians is a mutual insurance company created by physicians for physicians in response to the last medical liability crisis. Its mission is to sell insurance at the lowest premium, and any profit that might be made is returned to the policyholder as a credit against future premiums or as a policyholder dividend.
Most Georgia physicians have no choice but to be insured by this mutual company because all the other medical liability insurance carriers, save one, have left the Georgia market. If the medical liability insurance business were profitable in Georgia, why would carriers have left in droves? The claims made by opponents of civil justice reform are simply not true. Check the facts for yourself:
Fiction: Insurance company losses in the stock market are driving up premiums!
Fact: Not true. 90% of all insurance company assets are invested in US Treasury and Corporate Bonds. In 2001, MAG Mutual¹s yield on investments was 5%. In the height of the stock market boom of the 1990¹s, MAG Mutual¹s yield was 6.2%. Finally, it is against the law in Georgia to consider investment losses in rate making.
Fiction: Bad doctors are the problem!
Fact: Not true. MAG Mutual provided data on claims in Georgia for the last decade, 1993 to 2003. In 64,272 physician exposures, there were only 1.45% in which a claim was paid. Of those paid claims, 94% were the first or second claim against that physician. The fact is, bad doctors can¹t get insurance and can¹t afford to practice in Georgia.
Fiction: Jury awards are not linked to premium increases!
Fact: Not true. The frequency of claims has remained relatively constant. It is the increasing awards that are driving up settlements and, in turn, drive up premiums. The average claim payout has doubled in Georgia since 1995, from $215,000 to $457,000 in 2003. In Georgia, the number of $1 million claims has dramatically increased. In 1990 there was one. In 2002, there were 15. The number of $2 million dollar claims has gone from zero in 1990 to six in 2002. Every dollar MAG Mutual takes in premiums goes to defend suits and pay claims.
Fiction: There is no such thing as a frivolous lawsuit!
Fact: Not True. Since 1982, 84.1% of all claims made against a physician have been closed with no payment to the claimant. Of those cases that have gone to trial since 1982, 82% have resulted in verdicts in favor of the physician. The opposition says that this is evidence that the system works. What about the cost to defend these cases? The average defense cost to try a case is $178,350.
Fiction: Caps on non-economic lawsuits will not stabilize the market!
Fact: Not true. A study by the U.S. Department of Health and Human Services states with a cap of $300,000 or less on non-economic damages, an average premium increased 18% over the course of the last two years. In states with out a cap on non-economic damages, the average premium increase was 45% during that same period. (U.S. Department of Health and Human Services, “Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Health Care.”) California enacted a cap of $250,000 on non-economic damages in 1975. According to the National Association of Insurance Commissioners, premiums have risen 167% in California since 1975. During that same period in Georgia, premiums have gone up 505%.
The American Academy of Actuaries determined that, “Interstate data unequivocally support the premise that caps on non-economic damages are an effective means of reducing malpractice costs.” (Contingencies, “The Evidence Is In,” November/December 2003.) Caps on non-economic damages will work for three reasons: settlements will be reduced based on lower verdicts; non-economic damages can make up as much as 2/3 of claims payments; and claims frequency is reduced by more than 15%. (Contingencies, “The Evidence Is In,” November/December 2003.) An obstetrician in Miami, Florida pays 250% more in premiums than one in Los Angeles, California.
Dr. Jack Chapman, Gainesville Eye Associates, is Chairman of the Board of The Medical Association of Georgia (MAG). He is a member of the Greater Hall Chamber of Commerce Health Committee and Board of Directors. The Medical Association of Georgia has been promoting a better state of health for Georgia residents for more than 150 years. Through strong advocacy efforts, MAG is protecting patients’ ability to access quality medical care and is securing a strong practice environment for Georgia physicians.
Related Information http://www.mag.org