For more than a decade, most physicians have paid a steady amount for medical liability insurance. But that price stability appears to be ending, according to a recent analysis.
In 2019, more than 25% of medical liability insurance premiums rose for internists, ob.gyns., and surgeons, a review by the Medical Liability Monitor (MLM) found. The MLM survey, published annually, analyzes premium data from major malpractice insurers based on mature, claims-made policies with $1 million/$3 million limits for internists, general surgeons, and ob.gyns.
The increases mark a shift in the long-stable market and suggest rising premiums in the future, said Michael Matray, editor for the Medical Liability Monitor.
“It’s my impression that rates will increase again in [2020]. It’s almost a foregone conclusion,” he said in an interview. “We can expect more firming within the market.”
Most of the premium increases in 2019 were small – between 0.1% and 10%, Mr. Matray said. At the same time, close to 70% of premium rates were flat in 2019 and about 5% of premium rates decreased, according to the survey, released in late 2019.
Comparatively, about 58% of premium rates were flat from 2007 to 2014, about 30% of rates went down during that time frame, and 12% of rates went up. From 2015 to 2018, nearly 76% of rates were steady, 10% went down, and 15% of rates increased, according to the latest analysis. 2019 was the first time since 2006 that more than 25% of premium rates rose, the survey noted.
Alyssa Gittleman
“This is a normal cycle for the insurance industry – years of feast, followed by years of famine. Eventually companies reach a point where they feel enough pain and one response is to raise rates,” said Alyssa Gittleman, a coauthor of the survey and senior associate in the insurance research department at Conning, an investment management firm for the insurance industry.
“We could also point out many of the rate increases reported in the survey came from the larger [medical professional liability] companies. These companies are well capitalized, and the fact that they are raising rates could be a bellwether that a hard market is coming. However, as we said in the survey, it will probably take another 12-24 months before we know for certain,” she added.
Location, location, location
Physicians continue to pay vastly different premiums depending on where they practice. Ob.gyns. in eastern New York for example, paid about $201,000 in 2019, while their Minnesota colleagues paid about $16,500. Internists in southern Florida, meanwhile, paid about $49,000 in 2019, while their counterparts in northern California paid about $4,100. General surgeons in southern Florida paid about $195,000 for malpractice insurance, while some Wisconsin general surgeons paid about $11,000.
“Medical malpractice rates are determined locally, that’s why we don’t give state averages or national averages [in the survey],” Mr. Matray said. “It’s all determined by malpractice claims history within that territory and how aggressive the plaintiffs bar is in those areas.”
Two states – Arizona and Pennsylvania – experienced exceptional rate decreases in 2019. In Arizona, The Doctors Company lowered their rates by more than 60% for internists, general surgeons, and ob.gyns. In Pennsylvania, which operates a patient compensation fund, The Doctors Company decreased its rates between 20% and 46% for each of the three specialties. The insurer reported it made the decreases to align its rates with other insurers in those states, according to the survey. The Doctors Company did not respond to messages seeking comment for this article.
Bill Burns
When individual companies greatly increase or greatly decrease rates in a given state, it’s generally to bring their rates in line with those of larger companies in the market, said Bill Burns, a coauthor of the MLM report and a vice president in the insurance research department at Conning. In 2018, The Doctors Company held about 2% of the market in Arizona, and the company held about 1% of the Pennsylvania market, he noted.
“These decreases, which get them in line with the larger writers, should tighten up the range of rates in those states,” Mr. Burns said in an interview. “To sell the product, they’re going to have be close to the competition.”
For a clear picture of the overall premium landscape, the survey authors analyzed the data both with and without the exceptional rate decreases in Arizona and Pennsylvania. Regionally – excluding the exceptional decreases – the average premium rate increase was 2% in the Midwest, 1.4% in the Northeast, 1.1% in the South, and 0.3% in the West.
For all three specialties surveyed, premiums rose slightly in 2019, with surgeons experiencing the largest increase. Internists saw a nearly 1% average rate increase, ob.gyns. experienced a 0.5% rise, and surgeons experienced a 2.3% rate increase, the survey found. For doctors in the seven states that have patient compensation funds, internists experienced a nearly 2.1% average rate increase, ob.gyns. saw a 1.4% rise, and surgeons experienced a 2.1% rate increase. (These data sets exclude the exceptional rate decreases in Arizona and Pennsylvania.)
The change in rates for general surgery could mean more claims are being filed against surgeons or that the cost of claims are rising, Mr. Burns said.
“The differences are not terribly significant, but suggest something is happening with general surgery,” he said.
Why are rates on the rise?
Brian Atchinson
A number of factors are behind the changing medical liability insurance market, said Brian Atchinson, president and CEO for the Medical Professional Liability Association (MPL Association), a trade association for medical liability insurers.
While the frequency of claims against physicians has remained flat for an extended period of time, the cost of managing those claims has continued to increase, he said.
“Medical liability insurers insuring physicians and other clinicians, they need to defend every claim that they believe warrants defense,” Mr. Atchinson said in an interview. “When the medical treatment provided is within the appropriate standards, even though there may be claims or lawsuits, every one of those [cases] can be very expensive to defend.”
Other contributers to the increasing rates include the trend of high-dollar settlements and judgments, particularly in the hospital space, Mr. Atchinson noted. Such large payouts are generally tied to hospital and health system claims, but they still affect the broader medical liability insurance marketplace, he said.
Additionally, a growing number of medical liability tort reform measures enacted over the last 20 years are being eliminated, Mr. Atchinson said. In June 2019, the Kansas Supreme Court for instance, struck down the state’s cap on damages for noneconomic injuries in medical liability cases. In a 2017 ruling, the Pennsylvania Supreme Court changed the state’s statue of limitations for medical malpractice wrongful death claims from 2 years from the time of the patient’s injury to 2 years from the time of the patient’s death.
When legislatures change state laws and courts invalidate protections against nonmeritorious lawsuits, the actions can have serious consequences for physicians and companies operating in those states, Mr. Atchinson said.
“These [changes] will all ultimately work their way into the rates that physicians are paying,” he said.