After looking at the summary information about claims of tort reformers and the reality of tort reform, it doesn’t take long to realize that the public gets very little out of the deal. Those hurt by medical mistakes lose legal rights and certain incentives to improve patient safety are gone. Little is gained by most in return. So who actually is pushing for these laws? The answer, unsurprisingly, are those few big interests that stand to gain from limiting payouts following medical mistakes. One of the most important supporters of these laws is the insurance industry–specifically those companies who provide medical malpractice insurance
The Medical Malpractice Insurance Interests
The Center for Justice & Democracy med mal briefing book summarizes some important recent work on the state of the industry and the effect of tort reform.
The bottom line is that the medical malpractice insurance industry is thriving. A 2009 report from the American for Insurance Reform (AIR) found that 2007 and 2008 were near record years for the industry and the reported predicted that 2009 would likely be yet another highly profitable year–it was.
Consider this, the overall return on net-worth for insurance companies in the “property/casualty” industry is a healthy 12.5%. Not only are medical malpractice insurers matching that average, they are excelling. The return on net worth for medical malpractice insurers in 2009 was well over 15%. Put another way, in the law few years the companies’ loss ratio was at only 61.1%. That means that the companies paid out in claims only 61% of money that it took in for premiums. The rest was for overhead and profit.
The same pattern of a healthy, robust industry comes from looking at reserves. These reserves are the money that the company sets aside. A report from A.M. Best explains how these reserves are often manipulated by the industry in an effort to get approval for higher rates. For example, there are often claims that rates need to be raised to increase reserves so that future claims can be paid. But the relation between the two does not mesh with reality.
Illinois Medical Malpractice Insurers
So what does all of this have to do with medical care and tort reform?
A common argument for passage of these laws–including in our state–is the idea of a “crisis” of medical malpractice lawsuits. The argument is that many patients file these lawsuits, often frivolously, and the payouts are decimating the insurance industry’s ability to survive. But the truth is far less dramatic. Not only is the medical malpractice industry working just as it always has–it’s thriving.
It takes little imagination to understand why it might be thriving. Tort reform laws passed in various areas have essentially given insurers a free pass from providing compensation as required under the terms of their agreements with clients. Those hurt by medical mistakes are limited in their recovery–no matter how much damage they actually experienced as a result of the incident. This often wreaks a great injustice on the medical patient, but it is a boon to the insurance company.
At the end of the day, local residents should not be persuaded of the need to give up basic rights in order to help a private insurance industry that is already thriving. Those claims about the public benefits simply do not materialize. The only thing that does materialize are increased profits for already profitable industries.
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