Santa Monica, CA – California Insurance Commissioner Dave Jones has called on insurance companies that sell medical malpractice coverage to medical providers such as doctors, hospitals and clinics to lower premiums that appear to be excessive. The nonprofit Consumer Watchdog applauded the Commissioner, noting that if the insurers did not respond, the Commissioner can take action to lower excessive rates under the rules of Proposition 103. Between 2002 and 2005, Consumer Watchdog saved medical providers $66 million by successfully challenging several medical malpractice insurers' proposed rate hikes. (See http://www.consumerwatchdog.org/images/inssavings.gif.)
"Proposition 103 says that no insurance company's rates can 'remain in effect' if the rate is excessive, and companies have an obligation to cut bloated premiums," said Consumer Watchdog's Executive Director Doug Heller. "If the insurance companies don't follow the rules, the insurance commissioner can and should step in and order rate hearings."
Consumer watchdog pointed to data from the National Association of Insurance Commissioners to highlight that medical malpractice insurance rates in California are out of line and need a regulatory adjustment. According to the data from 2009, for every $1,000 in premiums paid to medical malpractice insurers:
- Only $222 went to pay claims of injured patients
- $243 went to pay insurance company adjusters and defense lawyers
- More than $280 (28.1%) of medical providers' premium went to profit (not including additional investment income earned or taxes paid)
"When insurance companies use more premium to fight claims than they do to pay them, and still more than that for profit, then the commissioner has to step in," said Heller.
One of the key reasons there is much bloat in California's medical malpractice insurance rates is that under California's draconian "MICRA" law, which limits the rights of injured patents to have their claims paid, insurers have very little incentive to pay the legitimate claims of patients injured by medical negligence. 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.
Under California's MICRA law insurance companies are gouging doctors and hurting patients, resulting in undeterred negligence as evidenced by a recent spate of cases highlighted in these news stories:
Los Angeles Times: Parents assail malpractice caps after daughter's death at UCLA hospital http://www.latimes.com/news/local/la-me-ucla-death-20110122,0,5352148,full.story
Sacramento Bee: Lawsuit Alleges ER Negligence in Treating Toddler's Infection http://www.sacbee.com/2011/02/15/3403311/lawsuit-alleges-er-negligence.html
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Consumer Watchdog is a nonprofit, nonpartisan organization with offices in California and Washington, D.C. http://ConsumerWatchdog.org/