CA Insurance Regulation, Not Failed Malpractice Caps, Should Be Model for Oregon Reform

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Caps Keep Infants, Women, Seniors, Low-Income Victims From Finding Attorneys

Salem, OR — A new study shows that California medical malpractice premiums rose 450% in the thirteen years following passage of a cap on victim compensation, and decreased 2% in the thirteen years after enactment of insurance rate regulation, according to testimony today by the California-based Foundation for Taxpayer and Consumer Rights (FTCR). The group presented industry data showing that California’s Proposition 103, a 1988 voter-approved insurance reform initiative, and not the state’s malpractice caps law — known as the Medical Injury Compensation Reform Act of 1975, or MICRA — lowered malpractice premiums for physicians in that state.

“The data clearly show that malpractice caps do not save doctors money,” said Harvey Rosenfield, FTCR president and author of Proposition 103. “Only when Californians enacted insurance reform that mandated lower rates and regulated insurance companies did physicians see relief from high rates. Lawmakers looking to California as a model for malpractice insurance reform must understand that regulation worked and liability caps did not.”

Rosenfield also demonstrated that the California damage cap makes it unlikely for victims with low economic damages to find an attorney to represent them, no matter how egregious the malpractice. For instance, women who lose their fertility, low-income patients with lost limbs, or infants who die because of medical mistakes, can show no wage loss or medical bills for their injuries. The non-economic damage cap denies these victims their day in court.

The situation stirred well-known insurance defense attorney Robert Baker, who defended malpractice suits for more than twenty years, to testify to Congress about the problem in 1994. Baker’s full statement can be found here.

According to the FTCR study, available online:

  • By 1988, thirteen years after the passage of MICRA, California medical malpractice premiums had reached an all-time high — 450% higher than in 1975, when MICRA was enacted;

  • Premiums dropped 20.2% during the first three years in which insurance reform Proposition 103 was in effect. The law mandated that rates be immediately rolled back 20%;

  • Insurance rates were frozen for four years;

  • Medical malpractice insurers refunded over $135 million to policyholders as a result of Proposition 103. By 1992, three of the state’s largest medical malpractice insurance companies — Norcal Mutual, SCPIE and The Doctors’ Company — had returned more than $69 million directly to physicians;

  • During the first twelve years of the malpractice caps in California, insurers spent less than 32 cents of every premium dollar compensating victims and more than 68 cents of every premium dollar on other costs such as overhead, profit and insurance defense lawyers;

  • In California, medical malpractice insurance companies spend 35% of premiums fighting claims, as compared to the national average of 21%.

Rosenfield later testified at a hearing of the House Committee on Judiciary where he detailed evidence in the report which disproves claims made to the committee Monday by the Oregon Medical Association that malpractice caps will lower doctors’ premiums.

“Limits on insurer profiteering, not the rights and compensation of innocent victims, are what have kept malpractice premiums stable for California doctors,” said Rosenfield. “Regulatory cops, not arbitrary caps, will bring down malpractice premiums in Florida.”

In addition to the data analyzed, the report includes California Department of Insurance news releases proving that Proposition 103 directly refunded millions of dollars to doctors. Insurance industry and doctors’ lobbyists have told lawmakers in some states that Proposition 103 did not apply to medical malpractice insurance.

The report also finds that during much of the 1980s medical malpractice premiums in California generally tracked national insurance premiums, and skyrocketed 47% between 1985 (when the malpractice caps law was upheld by the California Supreme Court) and 1988. The data clearly show that malpractice caps did not reduce rates.

The original California Department of Insurance press releases announcing refunds by medical malpractice insurers can be downloaded here.

News articles describing the rate freeze imposed on all California property and casualty insurers, including medical malpractice insurers, can be downloaded here.

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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