PIAA Says Weiss Study on Tort Reform and Medical Liability Premiums is Flawed

June 9, 2003

According to the Physician Insurers Association of America (PIAA), Martin Weiss and his rating organization have engineered a report that is getting lots of media attention in spite of the fact that it is reportedly fatally flawed.

Studying 19 states with caps on non-economic damages, Weiss said it found that from 1991 to 2002 the median malpractice payout rose 37.8 percent in states with caps, compared with a rise of 71.3 percent in states with no caps. While the use of median payment data shows that cap states fare better than others, it reportedly greatly understates the difference by ignoring the spiraling rise in total claim payments caused by a greater proportion of large payments.

According to the PIAA, for example, Florida (one of Weiss’ non-cap states) saw total claim payments rise by 141 percent during the evaluation period, according to the National Practitioner Data Bank. In contrast, total claim payments have risen by “only” 47 percent in California, which passed a $250,000 cap on non-economic damages in 1975. It reportedly has been the PIAA’s belief all along that any type of cap on non-economic damages over the amount of $250,000 simply does not work, with West Virginia’s former $1,000,000 cap being a prime example. The Weiss study reportedly mistakenly assumes that all levels of caps are effective by including them all in the study.

In addition to those reported flaws, the PIAA’s Larry Smarr said Weiss’ methodology actually inflates carriers’ premium increases by not weighting premiums according to market share.

For example, when Weiss determined median rates in a state, he reportedly appeared to give the same weight to a carrier with the highest rate, which in all probability has the lowest market share, as he gave to the carrier with lower rates, which most likely has the highest market share. Also, Weiss did not reportedly account for discounts or returns of premium in the form of dividends that insurers routinely pass on to physicians. Finally, the PIAA also points out that insurers often wait to lower their rates after a cap has been passed because it could be struck down in the courts, as occurred in Illinois, Ohio, and several other states, and which resulted in a 10-year delay in the state of California. Finally, over half of the states in the report had not adopted their caps in the beginning year of Weiss’ analysis.

According to the PIAA, the bottom line is that the Congressional Budget Office, the Joint Economic Committee, and the HHS have all issued well-researched studies that document the direct relationship between tort reforms, lower payouts, and over the long-term, lower premiums. The Weiss “study” is poorly done and simply out of its league, according to the PIAA.

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