Missouri Department of Insurance (MDI) Director Scott B. Lakin today said the state must act quickly to reverse a 2002 court ruling that has seriously disrupted Missouri’s medical malpractice market.
Under the January 2002 ruling in Scott v. SSM Healthcare St. Louis, courts can award multiple caps in each medical malpractice case for non-economic damages, rather than a single cap of $557,000 per injury that increases each year to reflect inflation. For 15 years, Missouri courts operated under a single cap.
After the Scott v. SSM decision, Missouri insurers more than doubled their reserves for future payments to 2002’s malpractice victims even though the number of claims actually fell again last year, Lakin said.
Claims filed – one of the most important indicators of future costs – fell another 6 percent for all medical providers and remained stable for doctors in 2002, he said. Claim-filing levels are 37 percent or more below their all-time highs.
But unless the General Assembly acts to undo Scott v. SSM Healthcare, Missouri health-care providers will face unnecessarily large premiums for years to come, he said.
“Looking at our medical malpractice environment, I can identify one pressing trouble spot: Scott v. SSM Healthcare,” Lakin said.
“The department and Gov. Bob Holden in February urged the General Assembly to reverse this decision. That change, more than any other, should provide rate relief for physicians and other providers. But the provision is buried in pending legislation full of special-interest items – like new legal privileges for shoddy nursing homes.”
Scott decision helps boost expected 2002 losses to 108% of premium, 118% for physicians
Multiple defendants are common in malpractice litigation, and the Scott decision further allowed multiple caps for each defendant if they committed medical negligence more than once, even if a single injury resulted.
Lakin noted that insurers have testified before legislative committees that they were doubling their reserves after Scott v. SSM. “This court ruling created enormous uncertainty about the potential size of an insurer’s risk when patients are injured through negligence — and the 2002 data bears that out,” he said.
In 2001, licensed insurers estimated payouts on claims filed that year would total $79 million. In 2002, the amount increased to $168.7 million on 2002 claims – by more than $89 million or 113 percent.
The insurers’ financial reports also reflect the surge in premium increases over the past two years. Health-care providers paid licensed insurers $156.1 million for coverage in 2002 — $58 million or 61 percent more than the previous year. Doctors’ premiums rose to $104.7 million, up by a slightly lesser 55 percent from $67.6 million in 2001.
Overall, Missouri’s licensed medical malpractice insurers reported a “loss ratio” of 108 percent — i.e., they expect to pay out $1.08 cents in benefits to 2002 claims’ victims for every dollar of premium collected, up from 79 cents in 2001. For doctors, the figure reached $1.18 in expected payouts for every premium dollar in 2002. The loss ratio for physicians almost doubled from 61 cents the year before.
The increase in the loss figures also covers insurers’ re-evaluation of how the Scott decision is expected to increase cost estimates for claims filed in 2001 and previous years. This one-time adjustment overstates losses for 2002 activity.
Insurers likely have not actually paid most of the losses reported for 2002. Successful medical malpractice claims are not settled for 30 months, on average, so insurers estimate those future payments and hold funds in reserve. The losses largely exist on paper now.
Legislature’s cut in malpractice cap would have little effect on rates, but would harm worst-injured victims
The 2002 data indicates that current legislative efforts to cut the $557,000 cap on non-economic damages would provide little rate relief for physicians and other health-care providers, even after waiting three to five years for court challenges to end.
Senate Bill 280, which has passed the Senate and awaits House action, would reduce the cap to $350,000. In 2002, that change would have prevented the payment of $7.6 million to 34 of the most severely injured victims, but accounted for only 7.9 percent of the total payouts. If total premium revenues were reduced by that $7.6 million to account for a change in the cap, health-care providers would have saved only 4.4 percent.
The change would not affect 83 percent of the payouts for non-economic damage awards in 2002.
Topics Carriers Legislation Claims Missouri Medical Professional Liability
Was this article valuable?
Here are more articles you may enjoy.
4,800 Claims Handled by Unlicensed Adjusters in Florida After Irma, Lawsuit Says 
Progressive Gains as Drivers Shop Around for Auto Insurance—Again 
Tiny Texas City Repels Russia-Tied Hackers Eyeing Water System 
AIG General Insurance Chairman McElroy to Retire May 1 
