Ark. Med-Mal Rate Increases Slow

September 13, 2005

The cost of malpractice insurance for Arkansas doctors didn’t rise as much this year, but a new law limiting damages in liability suits isn’t getting the credit, according to the Associated Press and the Arkansas Democrat-Gazette.

Instead, the state insurance department says the slowdown stemmed mostly from the ability of insurance companies to balance their books after huge increases in previous years.

State Volunteer Insurance Co., which covers about 75 percent of Arkansas doctors who buy their own insurance, had a 5.5 percent increase in premiums this year, down from a 13.6 percent increase in 2004, the department said in an annual report required by a 2003 state law.

“It seems to go in waves,” said Steve Williams, chief executive officer of State Volunteer Mutual. “(Premiums) go up for a while and plateau, go up for a while and plateau. It never really goes all the way back down.”

The report said greater increases in the recent past allowed insurers to balance their books in 2004 after years of losses. For every dollar collected in premiums last year, malpractice insurers spent 97 cents in claims. In 2003, insurers spent $1.32 for every dollar taken in.

Between 1999 and 2005, State Volunteer Mutual’s malpractice premiums for internal medicine shot up 240 percent. In 2004, the American Medical Association labeled Arkansas one of 15 “crisis states,” saying that rising malpractice premiums and the lack of restrictions on the size of jury awards in malpractice lawsuits were driving doctors out of the state.

But David Wroten, executive vice president of the Arkansas Medical Society, said that hasn’t happened.

“When (State Volunteer Mutual) only gives a 5 percent rate increase, no one’s going to go shopping for another carrier,” he said. “A lot of states have it a lot worse than we do.”

Much of the increase came in 2002, after The St. Paul Cos. left the malpractice market. The company insured 51 percent of Arkansas doctors. With more claims, State Volunteer then raised premiums by 49 percent over the course of the year and other insurers increased rates by as much as 97.5 percent.

St. Paul wasn’t the only company to leave the market. In 1996, 81 companies offered malpractice insurance in Arkansas, said Charlye Woodard, an insurance department spokeswoman. Today there are six.

“The loss of even one more medical malpractice insurer will result in significant declines in both availability and affordability of coverage for the medical community,” the department report said. The 3,100 internists insured by State Volunteer now pay $6,100 annually for coverage, Williams said. Doctors in many other states pay more, though.

In 2003, the state Legislature passed a law to limit punitive damages in medical malpractice lawsuits and place tougher evidence requirements on plaintiffs. The number of claims fell and insurance rate increases slowed. But the Insurance Department says the law is too new to have had a role in the relatively small jump in medical malpractice premiums.

An opponent of the 2003 law, lawyer Morgan E. “Chip” Welch of Little Rock, predicts the tort changes actually will have no effect on the behavior of insurance companies.

“It doesn’t affect the ability of insurance companies to charge an arm and a leg for coverage,” he said. “They do that because they can. They will raise rates.”

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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