LOS ANGELES, CA — Medical malpractice insurance rates might be too high because some insurers are spending as little as 2 or 3 percent of premiums to pay out claims, according to the California Department of Insurance.
Insurance Commissioner Dave Jones said in a statement Thursday that insurers should reduce rates paid by doctors, surgeons, clinics and health providers while his staff scrutinizes the numbers.
"We have found that recent loss ratios the percentage of every premium dollar the insurer spends on claims of many medical malpractice insurers are low," said Jones. "Low loss ratios are one indication that premiums may be too high."
Medical malpractice is the failure of a doctor or medical professional to operate with an ordinary level of professional care, which can result in injury or death. Medical professionals are liable to pay damages in such instances, and take out insurance policies to cover such costs.
On average, insurers in California spent nearly 23 percent of collected premiums on claims and other losses.
The state's biggest medical malpractice insurer, Napa-based The Doctors Company, spent only 10 percent of the $179 million collected in premiums on claims in 2009. The company handles about 37 percent of the market in medical malpractice in California.
In a statement, the insurer's executive and general counsel David McHale said the company is committed to working with the state's regulator to charge reasonable rates and reflect the realities of the marketplace.
McHale added the company is the only medical malpractice insurer in the state to reduce rates in the past five years, referring to an average 18 percent rate cut for many of its 19,000 policyholders in 2008.
Doug Heller, president of the Santa Monica-based consumer advocacy group Consumer Watchdog, said the problem ends up hurting consumers who suffer because of malpractice and must too often fight insurers to get claims paid.
"The medical malpractice premiums in California have so much extra padding right now because the companies are taking premiums from doctors and hospitals but don't have to pay much out in claims," said Heller, calling on the commissioner to hold rate hearings.