Regulating insurers touted as solution

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Tulsa World

OKLAHOMA CITY — “Stringent” regulation of insurance companies has kept medical malpractice insurance rates stable for 13 years in California, a national consumer advocacy group says.

Public Citizen, based in Washington, D.C., has studied medical malpractice insurance rates in Oklahoma and 16 other states in the last 18 months.

Frank Clemente, director of Public Citizen’s Congress Watch, said data from government sources show that lawsuits and the legal system are not the problem in Oklahoma.

“We’re finding that this is largely an insurance industry problem that’s being faced by doctors,” he said.

Oklahoma’s medical and business communities say there is a crisis. They want to impose a cap of $300,000 on noneconomic awards to malpractice victims, as well as limiting their legal rights.

Public Citizen said in a recent 55-page report that in 1988 Californians passed “the nation’s most stringent reform of the insurance industry’s rates and practices.”

Within three years, according to Public Citizen, medical malpractice premiums dropped 20 percent and have generally followed the rate of inflation since.

A proposition passed by California voters created a stringent disclosure and “prior approval” system of insurance regulation, the consumer group said.

“This requires insurance companies to submit applications for rate changes to the California Department of Insurance for review before they are approved,” Public Citizen said.

The law also gave the state insurance commissioner the authority to place limits on an insurance company’s profits, expenses and projections of future losses.

Last September, the commissioner ruled California’s second-largest medical malpractice insurer’s rate request was excessive and ordered the insurer to cut its proposed rate hike by 36 percent.

The rate challenge was initiated by The Foundation for Taxpayer and Consumer Rights, a California nonprofit, nonpartisan organization.

Douglas Heller, the foundation’s executive director, said that in 1975, Californians adopted a cap law that was promoted as a way to reduce medical malpractice rates.

During its first 13 years, the rates increased by 450 percent, making voters frustrated and angry because the $250,000 cap law had failed to cut rates, he said.

Heller said that in the 13 years since the reforms became law, insurance premiums for doctors have decreased by 2 percent.

“In Proposition 103, one of the first things that it did was freeze rate increases to provide immediate relief,” he said.

Proposition 103 also required insurance companies to provide an immediate 20 percent rollback of premiums.

“The medical malpractice carriers were among the first companies to provide the rollbacks,” he said.

Heller said California consumers received $1.2 billion in refunds because of Proposition 103.

Insurance companies in California had threatened to leave the state if a rollback became law. The companies did leave the state “for one day in general protest of the law,” and then they resumed business in California, Heller said.

“Since then, California has had a vibrant, competitive insurance marketplace in medical malpractice and other lines as well,” he said.

Heller said his organization saved doctors $35 million by challenging medical malpractice insurance increases.

“These were not companies that were simply adding on because of high claims payouts. They were trying to gouge their doctors,” he said.

Speaking to a joint House-Senate committee on tort reform Thursday, Heller asked whether they would solve the insurance rate problem “by limiting the rights of injured victims, or are you going to do it by limiting the rates of insurance companies?”

“Limiting rates of insurance companies has worked in California very well, where limiting rights have never been shown to work.”

Dr. Jack Beller, past president of the Oklahoma State Medical Association, says the number of medical malpractice lawsuits and the awards both have increased, causing a crisis in Oklahoma.

Payouts by Physicians Liability Insurance Co., a subsidiary of the medical association, have risen from $26 million in 2000 to $52 million in 2003, Beller said.

PLICO’s malpractice rates for a family practice doctor have gone from $3,317 in 2002 to $5,307 in 2003, $7,403 in 2004 and is expected hit $11,000 in 2005, he said.

Public Citizen’s report on Oklahoma’s situation says average medical malpractice payouts in Oklahoma have declined when adjusted for medical service inflation.

Total malpractice payouts in the state have increased only 2 percent, and medical malpractice premiums are significantly lower in Oklahoma than its neighboring states, Public Citizen said.
Contact the author Paul English (405) 528-2465 or [email protected]

Consumer Watchdog
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