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How Do We Actually Control Medical Malpractice Insurance Rates?

As outlined yesterday, medical malpractice insurance premiums for doctors are not affected by tort reform laws. But that doesn’t necessarily mean that there is nothing to be done to lower them. In fact, many argue that insurance companies need to be reigned in with stricter rules to ensure that they are not bilking those who need their services. In fact, Illinois is often used as an example of the effects of insurance reform.

Illinois, Medical Malpractice, & Insurance Reform
The Center for Justice & Democracy discussed in its med mal briefing book how the Illinois case informs the reality of insurance reform.

In 2005 the General Assembly enacted a damage cap on non-economic injuries ($500,000 for doctors and $1 million for hospitals). The same legislation that enacted the caps included provisions for strong insurance reform. In 2010 the state Supreme Court struck down the damage caps as unconstitutional. However, in so doing, the insurance reform law was also struck down.

In the five years that the law existed, even many insurance lawyers admitted that it did not affect settlements or insurance rates. However, the insurance reform part of the law was shown to have very real effects. The Illinois Division of Insurance announced in 2006, shortly after the law took effect, that medical malpractice premium coverage for one malpractice insurer would be expanded while premiums would be cut at the same time (by 30%). The Division explained exactly why this change took place, and it wasn’t because of damage caps. Instead, it was because of the new insurance reform law that required the med mal insurance providers release data on how their rates were set. In other words, once the industry had to be more forthright and honest about their pricing, the competitive nature of the marketplace worked to set more reasonable rates.

A look at the overall data in our state shows the clear benefit of the law. The overall premiums paid decreased by almost $40 million each year for the first three years. More companies also entered the marketplace to provide the insurance-from 14 in 2005 to 19 in 2008.

Insurance Reform is Needed
Our own example makes clear that insurance reform works. Unfortunately, instead of pursuing real reform that will address possible premium problems, much more focus is on taking away the legal rights of medical patients. Not only is it unconstitutional to take away those legal rights, it simply ineffectual. Limiting the ability of a judge or a jury to make a determination in a case does nothing but ensure those hurt are not made whole and those responsible are not held accountable.

But it is even worse than that. Those hurt by medical negligence who do not receive full damages often end up receiving support from public coffers instead. It is important to shift the focus away from misguided claims about “windfall” judgments and instead on the reality that failure to demand full responsibility is ultimately a loss for the public. When public officials, lobbyists, and other activists try to steer the discussion toward these misguided arguments, we need to stand our ground with the facts.

See Our Related Blog Posts:

Tort Reform Does Not Affect Physician Supply

CJ&D Briefing Book: Too Many Medical Tests & Medical Profit