TRENTON, N.J.: The state should regulate insurance companies better and crack down on doctors who repeatedly commit malpractice to address ballooning malpractice premiums in New Jersey, consumer groups said Wednesday.
The groups spoke at a Statehouse news conference to counter arguments from doctors and insurance companies that capping the damages malpractice victims can recover is crucial to stabilizing malpractice premiums and keeping the best doctors, particularly specialists, working here.
Last week, thousands of doctors participated in rallies around the state and many withheld nonurgent services to press lawmakers to enact a $250,000 cap on pain-and-suffering damages, as California did in 1976. They say it is essential to stabilize malpractice premiums, which now exceed $200,000 annually for some high-risk specialists.
Consumer advocates said that state regulators should do more to get rid of bad doctors who make mistakes and repeatedly lose malpractice cases.
Public Citizen has said that between September 1990 and September 2002, 5.5 percent of New Jersey’s doctors made two or more malpractice payouts worth a total of about $939 million. These represented about 61 percent of all payments, according to information the consumer group obtained from the federal government’s National Practitioner Data Bank.
But John Shaffer, spokesman for the Medical Society of New Jersey, said it’s not the same doctors who lose cases each year.
Consumer advocates also argue a prime cause of the problem is poor financial management by malpractice insurers, from putting some premium money into risky investments to underpricing premiums during the late-1990s stock market boom and letting reserves run too low.
“We want to open the insurance companies’ financial books,” said Bridget Devane, an organizer with New Jersey Citizen Action.
She said the state should also require a rate rollback and closer regulator scrutiny of future rate increases, like the 20 percent rollback and other changes enacted under a 1988 California voter initiative called Proposition 103.
Pete Guzzo, director of the consumer and senior citizens coalition Consumers for Civil Justice, said the insurance industry has duped doctors about the need for caps.
“Doctors, lawyers and victims should be standing together,” Guzzo said.
Insurers generally concede they kept premiums low in the late 1990s as they competed for market share, but insist their money is invested in safe bonds. Still, investment income from bonds is down sharply now.
Larry Smarr, president of Physician Insurers Association of America, a trade group for about 40 doctor-owned malpractice insurers, said consumer advocates are wrongly giving Proposition 103 credit for California’s stable malpractice rates, which he attributes to the damages cap and other reforms.
Smarr and Phil Hinderberger, general counsel of California’s largest malpractice insurer, NORCAL Mutual Insurance Co., both said Wednesday that court challenges to 103 and consent orders worked out between malpractice insurers and California’s insurance commissioner prevented malpractice insurers from having to roll back rates at all.
Because of a state Supreme Court challenge, California’s $250,000 cap and other reforms likewise did not take effect until the late 1980s, making it difficult to determine the true impact of either the cap or the voter initiative.
Consumer groups argue there’s no guarantee that, even if caps produced savings, insurance companies would pass them on to doctors.
Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights of Santa Monica, Calif., said caps are particularly unfair when the victim is a young child or a low-wage worker.
That’s because the separate court awards to those victims to cover their lost wages tend to be lower than awards to older people with higher wages, he said.
Court added that it’s also difficult for victims to get an attorney to represent them without prospects of a sizable payoff.
Many Democratic lawmakers and Gov. James E. McGreevey also say caps are unfair for victims, but they are trying to work out a legislative compromise.
Shaffer said California malpractice rates were tripling in 1974 before the reforms were enacted but have been stable for years.
“Patients are able to access care (there). That’s what we want in New Jersey,” Shaffer said.
He noted the state insurance commissioner can order malpractice insurance companies to reduce rates considered excessive. That happened last week, when Zurich American was ordered to rollback rate increases of 108 percent to at most 30 percent.