National Bill Would Hurt Patients, Help Only Insurers’ Profits
Click to view the Medical Malpractice Loss Ratio chart
Medical Malpractice Operating Profits chart.
Washington, DC — Debunking the myth that restrictions on malpractice victims lower doctors’ premiums, a California consumer group testified before Congress that only insurers have benefited from California’s restrictions on the injured and they should not be imposed on the nation.
Click here to read FTCR’s testimony .
HR 4600 would impose, among other limits on patients, a national $250,000 cap on recovery for innocent malpractice victims’ pain and suffering, no matter how serious the injury or egregious the malpractice.
“HR 4600 will deny innocent victims of medical negligence both adequate compensation for their injuries and legal representation for legitimate claims,” Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, told the House Energy and Commerce Committee’s Health Sub Committee. “It will confer substantial financial benefits only on malpractice insurance companies, not the average physician. To the extent that staff model HMOs indemnify their staff and facilities, as the nation’s largest HMO does, HR 4600 will also protect HMOs from liability for the harm they cause to patients. The evidence comes from California, where the model for HR 4600 has had these consequences.”
Court presented the Committee with data from the National Association of Insurance Commissioners. It shows that California insurers have, in fact, profited greatly from California patients’ pain.
- In most years since the courts ruled that capping victims’ compensation was constitutional, 1986, California malpractice insurers have paid out in claims less than fifty cents of every dollar they have taken in through premiums (every year since 1989). By contrast, malpractice insurers nationally have typically paid out in claims more than two-thirds of every premium dollar.
- ICalifornia malpractice insurers’ “operating profits” have been higher than the rest of nation since the restrictions were implemented, even though many insurers claim to be “not for profit.” For non profits, the money taken in from doctors but not paid to victims can also be tied up in excessive overhead, assets and reserves that yield investment profits or in higher legal costs of defending against claims.
- IThe 2000 average premium per doctor in California was only 8.2 percent below that of the nation ($7,200.61 vs. $7,843.75). The average malpractice premium in California between 1991 and 2000 actually grew more quickly (3.5 percent), than it did in the nation overall (1.9 percent.)
The chart below shows the loss ratio NAIC data taken from Report on “Profitability By Line By State, 1976-2001”
Loss Ratios for Malpractice Insurers
| Year | CA Loss Ratio: Losses Incurred/ Premiums Earned |
CA Profit ($000) |
CA Operating Profit: Profit as a % of Premiums Earned |
U.S. Loss Ratio: Losses Incurred/ Premiums Earned |
U.S. Profit ($000) | U.S. Operation Profit: Profit as a % of Premiums Earned |
| 1976 | 61.9% | 3,198 | 1.4% | 47.0% | 238,576 | 20.1% |
| 1977 | 38.9% | 50,638 | 22.3% | 40.4% | 315,608 | 24.1% |
| 1978 | 41.3% | 53,227 | 21.4% | 59.7% | 175,510 | 12.7% |
| 1979 | 42.1% | 59,494 | 24.9% | 68.2% | 119,064 | 8.6% |
| 1980 | 44.3% | 61,241 | 26.6% | 77.8% | 90,662 | 6.8% |
| 1981 | 61.3% | 49,733 | 24.4% | 101.0% | 36,959 | 2.8% |
| 1982 | 81.8% | 19,169 | 9.1% | 113.0% | -65,644 | -4.3% |
| 1983 | 70.5% | 45,961 | 16.0% | 104.4% | 44,262 | 2.4% |
| 1984 | 92.7% | 18,358 | 4.9% | 112.1% | 187,029 | 8.8% |
| 1985 | 80.8% | 37,327 | 8.3% | 121.6% | -513,570 | -19.3% |
| 1986 | 68.2% | 89,382 | 14.2% | 98.5% | -99,011 | -2.6% |
| 1987 | 63.0% | 64,024 | 10.1% | 85.8% | 86,459 | 1.9% |
| 1988 | 52.4% | 137,936 | 20.8% | 75.6% | 426,683 | 8.4% |
| 1989 | 39.4% | 232,467 | 36.7% | 52.6% | 1,428,346 | 27.9% |
| 1990 | 35.6% | 241,699 | 39.9% | 53.9% | 1,449,651 | 29.4% |
| 1991 | 9.0% | 354,997 | 67.1% | 55.7% | 1,419,754 | 29.2% |
| 1992 | 39.8% | 148,998 | 28.3% | 69.5% | 1,495,273 | 29.1% |
| 1993 | 38.1% | 153,137 | 27.2% | 64.6% | 1,541,868 | 29.8% |
| 1994 | 37.5% | 148,807 | 25.8% | 59.3% | 1,506,702 | 25.4% |
| 1995 | 41.5% | 133,388 | 22.3% | 59.3% | 1,563,241 | 25.7% |
| 1996 | 45.0% | 132,262 | 21.7% | 62.9% | 1,696,723 | 28.3% |
| 1997 | 44.3% | 178,933 | 28.5% | 57.8% | 1,892,251 | 32.0% |
| 1998 | 41.3% | 197,932 | 30.3% | 73.0% | 1,258,887 | 20.3% |
| 1999 | 42.0% | 125,494 | 20.5% | 73.9% | 874,421 | 14.2% |
| 2000 | 45.8% | 171,520 | 28.1% | 80.9% | 869,373 | 13.6% |
Click here to view the Medical Malpractice Loss Ratio chart and the Medical Malpractice Operating Profits chart.
In the following separate analysis, nationally recognized actuary J. Robert Hunter, former Texas Insurance Commissioner and Federal Insurance Administrator under presidents Ford and Carter, compared national malpractice premium trends to those in California. Hunter found that from 1991 to 2000, malpractice premiums in California have stayed close to national premium trends. According to Hunter, “there is not much difference in the rates or the rate of change between California and the nation based on the latest decade of experience.”
| YEAR | CALIFORNIA NUMBER OF DOCTORS IN STATE |
U.S.A. NUMBER OF DOCTORS | CALIFORNIA MEDICAL MALPRACTICE PREM EARNED (in thousands) | U.S.A MEDICAL MALPRACTICE PREM EARNED (in thousands) | AVERAGE MED MAL PREMIUM PER DOCTOR CALIFORNIA |
AVERAGE MED MAL PREMIUM PER DOCTOR U.S.A. |
| 1991 | 76043 | 631400 | 529056 | 4862170 | 6957.33 | 7700.62 |
| 1992 | 76367 | 652100 | 526496 | 5138395 | 6894.29 | 7879.77 |
| 1993 | 76411 | 670300 | 563004 | 5174055 | 7368.10 | 7719.01 |
| 1994 | 77311 | 684400 | 576771 | 5931898 | 7460.40 | 8667.30 |
| 1995 | 78169 | 720300 | 597660 | 6080639 | 7645.74 | 8441.81 |
| 1996 | 79048 | 737800 | 610003 | 5992394 | 7716.87 | 8121.98 |
| 1997 | 80341 | 756700 | 628858 | 5917038 | 7827.36 | 7819.53 |
| 1998 | 81762 | 777900 | 652601 | 6195047 | 7981.72 | 7963.81 |
| 1999 | 82872 | 797600 | 611785 | 6155241 | 7382.29 | 7717.20 |
| 2000 | 84675 | 812800 | 609712 | 6375401 | 7200.61 | 7843.75 |
| 1991 to 1999 percent change | 3.5 | 1.9 | ||||
| 1991 to 1999 % change (annualized) | 0.4 | 0.2 | ||||
Sources:
Doctors USA: Statistical Abstract of the United States
Doctors CA: California Department of Consumer Affairs
Earned Premiums: NAIC Report On Profit By Line By State
“If there are savings to limiting the rights and recovery of innocent victims of dangerous and culpable doctors, then insurers have not passed them onto physicians,” said Court.
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