Key Points
- The tab for malpractice insurance has leveled off, and some primary care physicians have seen premiums drop.
- Patient safety initiatives, new limits on damages that can be awarded, and the relatively low success rate of cases against
physicians may have contributed to a drop in claims frequency.
- To trim your premiums, adhere to good business practices, practice safe medicine and use physician extenders carefully.
As a decade that has seen sharp increases in medical liability premiums heads toward its final year, the tab for malpractice
insurance has leveled off, and some primary care physicians—ob/gyns, in particular—have seen premiums drop. Of course, ob/gyns
aren't getting off cheap: According to Medical Economics' 2009 Exclusive Survey, which focused on physicians' 2008 earnings and expenses, ob/gyns paid a median $45,000 in liability
premiums in 2008. That's $10,000 less than the median $55,000 they paid in 2007 but still much higher than the $12,500 paid
by pediatricians, internists, family practitioners, and general practitioners.
Frank O'Neil, Senior Vice President of Corporate Communications and Investor Relations, ProAssurance
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Other researchers reported a similar downward trend in malpractice premiums. The annual rate survey done by Medical Liability Monitor, a monthly journal that tracks med-mal trends, showed that after sharp insurance premium increases in 2003, 2004, and 2005,
overall rates leveled off in 2006, began to drop in 2007, and either held steady or dropped further in 2008. For instance,
the Monitor indicated that almost 35 percent of insurance companies increased rates from 10 to 25 percent in 2004; 5.6 percent of companies
recorded similar hikes in 2006, and only 1.2 percent did so in 2006. Moreover, no companies dropped rates from 10 to 20 percent
in 2004, whereas 5.1 percent slashed rates by that much in 2006 and 15.6 percent did so in 2008.
The rate drop is a result of a sharp decrease in claims frequency during the past couple of years, says Lawrence E. Smarr,
president of the Physician Insurers Association of America (PIAA), a trade organization representing professional liability
insurance companies owned or operated by physicians and other healthcare providers. The other premiums driver is severity—that
is, the dollar amount of judgments—which has been trending upward during the past few years.
Lawrence E. Smarr, President, Physician Insurers Association of America
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Why is claims frequency dropping? Smarr says he isn't sure, but he cites improved patient safety efforts, as well as tort
reform in several states—Mississippi and Texas, for instance—that places ceilings on the amount a jury can award plaintiffs
for noneconomic damages and punitive damages.
"It could also be due to plaintiffs' attorneys finally getting fed up with losing too many cases," says Smarr, who notes that,
according to PIAA figures, only five percent of medical malpractice claims filed in the United States go to trial, and 80
percent of those trials yield verdicts favorable to the defense.
Malpractice insurance premiums for primary care doctors*
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"Rates, which spiked in the early part of the decade, have been going down in response to lowered losses," says Frank O'Neil,
senior vice president of corporate communications and investor relations for ProAssurance, which is headquartered in Birmingham,
Alabama, and sells professional liability insurance to physicians in 32 states.
As does Smarr, O'Neil maintains that no one dynamic has led to rate moderation. "Tort reform is a factor," he notes, "but
losses are down in states that haven't enacted tort reform. And although patient safety initiatives are on the upswing, as
medicine has become more bureaucratized and harder to navigate, patient frustration and unexpected outcomes still send patients
to attorneys. But it's also possible that these attorneys are becoming more selective, and that [selectivity] limits the frequency
of lawsuits."
How malpractice insurance cost varied in 2008 by . . .
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Michael J. Schoppmann, a principal in the healthcare law firm Kern Augustine Conroy & Schoppmann, practicing in New Jersey
and New York, notes that malpractice insurance rates may have stalled because, essentially, they have topped out. "In addition,"
he says, "more competition in some states—New Jersey is one example—has led to price cutting."
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