Martin D. Weiss, the head of the Florida-based rating service that bears his name, couldn’t have chosen a better way to ramp up the debate over medical malpractice lawsuits, and the increased costs of insurance coverage, than to challenge the perceived wisdom that the two are directly related.
In a widely discussed study, published on June 2, Weiss concluded that damage caps, long advocated by the health care and insurance industries, don’t automatically lead to lowering insurance premiums and called for a moratorium on their imposition.
“Caps on non-economic damages have failed to prevent sharp increases in medical malpractice insurance premiums, even though insurers enjoyed a slowdown in their payouts,” said a company announcement. “Tort reform has failed to address the problem of surging medical malpractice premiums, despite the fact that insurers have benefited from a slowdown in the growth of claims,” Weiss stated. “The escalating medical malpractice crisis will not be resolved until the industry and regulators address the other, apparently more powerful, factors driving premiums higher.”
Weiss Ratings, which prides itself on its independence, undertook the study with no preconceptions. “It’s part of our service to examine what’s going on in the industries we cover,” said Weiss vice president Melissa Gannon. “We decided that we could contribute to the debate; we had no hidden agenda, and no one else financed it.” She also observed that practically all of the other studies Weiss looked at had been conducted by the insurance industry, and focused almost exclusively on how caps limit damage payouts.
Weiss’s study compares the Payout/Premium figures for the 19 states that have passed legislation capping the amount of non-economic damages (chiefly for pain and suffering and punitive awards) and the rest of the states in the U.S. that have no limits (See charts in magazine). It also showed that “in states without caps, the median payout for the entire 12-year period was $116,297, ranging from $75,000 to $220,000, while the median payout for states with caps was 15.7 percent lower, or $98,079, ranging from $50,000 to $190,000.”(figure adjusted for inflation)
Weiss found that median premium payments in 2002 in cap and non-cap states were practically identical, slightly over $30,000. It also concluded that while the caps have lowered the amount of claims payments, they don’t appear to have significantly reduced premiums. In fact the study found that “in states with caps, the median annual premium went up by 48.2 percent, but, surprisingly, in states without caps, the median annual premium increased at a slower clip – by 35.9 percent.” It also found that premiums actually declined in “only 10.5 percent” of the states with caps, while in those without caps “18.7 percent experienced flat or declining premiums.”
If Weiss had left it there, the argument might simply have become one over who had the best statistics, but the rating agency went on to identify six other factors that also influence medical malpractice premium rates – “each of which may be exerting a greater impact on premiums than the presence or absence of caps.”
Editor’s Note: To see the full story, see the June 23 issue of Insurance Journal West.
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