House Republicans Have Their Talking Points on California Backwards: Insurance Rate Regulation, Not Medical Liability Limits, Lowered California Malpractice Insurance Premiums

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Washington, DC– House Republicans are misrepresenting California’s experience with medical liability limits to argue for legislation, HR 5, that would take away the rights of patients injured by medical negligence. Consumer Watchdog sent a letter to the bill’s author, House Judiciary Chairman Lamar Smith, today and called on him to set the record straight.

“California is the only state in the nation where the impact on medical malpractice insurance premiums of both strong insurance rate regulation and strict medical liability limits can be directly compared. Legislation you introduced this week that would severely limit the rights of patients who are victims of medical negligence relies on incontrovertible errors in your understanding of California’s experience,” wrote Carmen Balber, Washington DC director for Consumer Watchdog.

Medical malpractice insurance premiums increased 450% in California in the thirteen years after liability limits were enacted. However, in the first three years after insurance rate regulation was approved, malpractice premiums fell 20% and then stabilized even as premiums across the country continued to fluctuate. These savings are illustrated in a premium analysis by the Sacramento Bee:

California voters enacted the insurance reform initiative Proposition 103 at the ballot in 1988. It required a 20% rollback in premiums for companies including medical malpractice insurers. In a Judiciary committee hearing last week, Chairman Smith said that insurers did not pay the rollback, and therefore Proposition 103 could not have been responsible for insurance premium savings.

Consumer Watchdog’s letter corrects this error: “Property-casualty insurance companies in California eventually issued over $1.4 billion in refund checks under this provision, and medical malpractice insurance companies were the first in the state to voluntarily comply. The state’s top three medical malpractice insurance companies paid more than $60 million in refunds.”

The California Department of Insurance announcement of the refund by NORCAL Mutual is representative of refunds paid to malpractice insurance policyholders: “First Insurance Company To Voluntarily Comply with Proposition 103; NORCAL Mutual Agrees to 20 percent Policyholder Refund Totalling $19.9 Million.”

Proposition 103’s provisions for insurance rate regulation continued to provide savings for medical malpractice policyholders, wrote Consumer Watchdog:

“The 20% rollback was not the only provision of Proposition 103 that resulted in reduced medical malpractice premiums for doctors and other medical professionals. Proposition 103’s central reform was the creation of “prior approval” regulation of all property-casualty insurance rates, including medical malpractice insurance. The law requires insurance companies to open their books and get approval for any rate change before it takes effect.”

“Proposition 103 also allows any member of the public to intervene and challenge excessive rate increases. Consumer Watchdog has used this intervenor process to prevent $66 million in unjustified rate hikes for doctors and other medical professionals since 2003,” said the letter.

Consumer Watchdog urged the committee to invite Congressman John Garamendi (CA-10th), who was California Insurance Commissioner when the Proposition 103 refunds were paid and for much of the law’s implementation, to testify before the Judiciary Committee and clear up any misconceptions about the law.

“Only when strong insurance reform was enacted did malpractice premiums fall, then stabilize. We urge you to reconsider a path that will lock patients out of the courtroom and still fail to provide the health cost reductions you seek,” concluded the letter.

Click here to download the letter.

Click here to download a report on the impact of insurance regulation and liability limits in California.

For more information on insurance rate regulation and medical liability limits in California, visit Consumer Watchdog’s medical malpractice resource page.

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Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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