FACTS ABOUT THE MEDICAL MALPRACTICE INSURANCE “CRISIS”

[Guest guest]

FACTS ABOUT THE MEDICAL

 

MALPRACTICE INSURANCE " CRISIS "

 

Why is there an insurance crisis for doctors? Medical malpractice insurance

rates

 

have skyrocketed for doctors because of the mismanaged underwriting practices of

the

 

insurance industry. These business and accounting practices lead to insurance

" crises "

 

every ten years or so. Insurers make their money from investment income. During

years

 

of high interest rates and/or excellent insurer profits, insurance companies

severely

 

underprice their policies, engaging in fierce competition for premium dollars to

invest for

 

maximum return. But when investment income decreases because interest rates drop

or

 

insurers’ earlier price cuts make profits unbearably low, insurance companies

always

 

respond the same way: by sharply increasing premiums and reducing coverage.

 

Why won’t caps work? Since the legal system is not the cause of these insurance

 

" crises, " enactment of laws blocking injured consumers’ access to the courts or

limiting

 

their compensation will not – and have never - lowered insurance costs or rates.

This has

 

been documented in many studies, including the 1999 Center for Justice &

Democracy

 

study, Premium Deceit: The Failure of " Tort Reform " to Cut Insurance Prices. It

is not

 

surprising, then, that when both Nevada and Ohio enacted severe caps on medical

 

malpractice compensation within the last year, insurance companies immediately

 

proclaimed that they would not reduce insurance rates. In California, rates have

stayed

 

more moderate because in 1988 that state enacted the strongest insurance

regulatory

 

reform law in the nation. On the other hand, Missouri has severe caps on damages

and

 

other tort restrictions but is currently suffering through a severe insurance

" crisis. "

 

What will work? There is only one way to solve this problem: reforming the

business

 

and accounting practices of the insurance industry. One important step is to

repeal the

 

industry’s exemption from anti-trust laws, at both the state and federal

(McCarran-

 

Ferguson Act) levels. Another important step is to lower claim frequency by

weeding

 

bad doctors out of the system through enforcement of better doctor discipline.

States

 

should enact measures contained in California’s insurance law, Proposition 103,

which

 

requires a 20% rate rollback and prior approval of prices by the state insurance

 

commissioner under rigorous standards and allows consumer groups to intervene in

rate

 

hearings. States should also require insurers, as a condition of their license,

to undertake

 

risk management and the insurance commissioner should monitor this effort.

 

 

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[Guest guest]

There is a way to give patients some control over their malpractice

costs. Have legislatures set up a two tiered system. The patient

could then have the option of being insured the old way where the sky

is the limit, or he could opt to be covered under a system modeled

after the workman's compensation system where fair preordained

compensation is awarded for injury. The patient would pay for it

separately from the medical bill and agree to it in writing in

advance. There is nothing like giving people freedom of choice.