Consumer groups say market forces, not claims, caused most recent medical malpractice crisis
A consumer coalition released a report that disputes insurers' contention that the most recent medical malpractice insurance crisis for doctors was caused by rising costs.
The study, Stable Losses/Unstable Rates 2007, by Americans for Insurance Reform (AIR), a coalition of 100 consumer groups, claims that the crisis that hit doctors was not caused by claims, payouts or legal system excesses as insurers claimed. Rather, the study of the industry's own data, found:
- Inflation-adjusted payouts per doctor not only failed to increase between 2001 and 2004, a time when doctors' premiums skyrocketed, but they have been stable or falling throughout this entire decade.
- Medical malpractice insurance premiums rose much faster in the early years of this decade than was justified by insurance payouts.
- At no time were recent increases in premiums connected to actual payouts. Rather, they reflected the cyclical "hard" market that has occurred three times in the past 30 years.
- During this same period, medical malpractice insurers "vastly and unnecessarily" increased reserves for future claims despite any trend suggesting large future payouts. The reserve increases in the years 2001 to 2004 could have accounted for 60 percent of the price increases for doctors.
"This report is proof positive that the huge medical malpractice insurance rate increases between 2000 and 2003 were not related to a jump in claims," said study author J. Robert Hunter, director of insurance, Consumer Federation of America. "Rather, as in the mid-1970s and mid-1980s, they were simply the result of insurance industry economics, supplemented by insurer hype intended to divert attention away from the mismanagement by insurers that caused the crisis."
Co-author Joanne Doroshow, executive director of the Center for Justice & Democracy, said the report shows the crisis was a function of market forces. "This report shows that the real reasons medical malpractice insurance rates rose so dramatically for doctors during this decade was market forces and dropping interest rates, not because of a sudden increase in medical malpractice jury awards or payouts," Doroshow said.
She used the report to advocate for stronger regulation of the insurance industry. "State lawmakers must strengthen state insurance regulatory laws and Congress must repeal the decades-old McCarran Ferguson Act, which exempts the insurance industry from anti-trust laws," she argued.
The study can be found at:
http://insurance-reform.org