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    2008 Exclusive Survey—Malpractice premiums: Dropping, but still high

    Rising competition among Med-Mal carriers is good news for physicians.

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    Malpractice insurance rates dipped by an average of 4 percent across the country in 2007, according to actuarial research recently presented to the Physician Insurers Association of America. But in primary care specialties, the cost of insurance continued to be one of the highest practice expenses. Family physicians, internists, and pediatricians all paid a median of $12,500 annually for med-mal coverage, based on the survey. Ob/gyns forked over more than four times as much, because of their propensity to be sued. GPs, many of whom are older and phasing out of practice, paid just $7,500.

    Malpractice premiums are expected to stabilize or continue falling through 2009 in most areas, primarily because insurers are getting hit with fewer malpractice suits. Rob Francis, COO of The Doctors Company, one of the nation's biggest medical liability insurers, says that lawsuits have fallen anywhere from 10 to 75 percent since 2004, depending on locale. The largest percentage drop was in Texas, which reformed its tort law during that period.

    In general, Francis observes, "The state laws drive the premiums." In states that have seen tort reform — such as caps on jury awards — insurance rates tend to be lower. But improved liability climate is not the only factor keeping premiums down. As the medical malpractice business has returned to profitability in some areas, more insurers have entered or returned to those markets, notes John Keane, president of Keane Insurance Group in St. Louis, a leading malpractice insurance broker. Consequently, more carriers are bidding for physicians' business, and the competition has driven rates down.

    As in past years, malpractice premiums were higher in the East than in the South or West. That can be attributed, in part, to the litigious climate in the Northeast. Other factors include the lack of tort reform in New York, where rates rose in 2007, and conditions in Pennsylvania. Although there's been some reform in the Keystone State, liability carriers still regard it as a "nightmare," Keane says.

    Survey data revealed that Midwest rates were as high as those in the East — a change from the previous year. Keane, whose firm does a lot of business in the Midwest, points out that within the region, rates are quite varied. For example, they are much higher in Chicago, where premiums surpass those in Texas and California, as well as in Missouri and Kansas.

    The litigation environment affects regional rate differences in more ways than one, Keane adds. In Texas, for example, physicians typically carry coverage of only $200,000-$600,000; in contrast, the average coverage among doctors in Chicago is in the range of $1.3 million-$4 million. "That's for good reason: They need it," he says.

    According to the survey, inner city and rural areas offered lower rates than urban and suburban communities. Lee J. Johnson, a healthcare attorney in Mount Kisco, NY, points out that those who typically live in inner-city neighborhoods are less likely than the affluent to sue when they're victims of malpractice. Steve Kern, a malpractice attorney in Bridgewater, NJ, adds that lawyers may be reluctant to represent low-income patients because they can't claim that the alleged injury will result in a big drop in lifetime earnings.


    Malpractice premiums rose with number of patient visits...
    It's no mystery why physicians in large groups report that their liability insurance premiums are lower than those of doctors in small practices. "Big groups have a better negotiating position, and the carriers are more likely to negotiate with them," Kern says. "These practices are also more likely to have instituted risk prevention programs, which would reduce premiums. Also, they've got cross coverage and a better fail-safe system."

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    Ken Terry
    The author is a former senior editor of Medical Economics.