Looking for ways to save money on medical malpractice insurance premiums? You may be in luck. The topsy-turvy market for malpractice insurance seems to be taking a turn for the better. Now may be the best time in years to grab some insurance savings.
How long it will last is anybody’s guess. But a physician-friendly trend has emerged recently.
The newsletter Medical Liability Monitor reports that in 2007, 84 percent of malpractice insurers either reduced premiums or froze them at the 2006 rate, and that followed two consecutive years in which 70 percent of insurers cut premiums from the previous year’s level or held them steady.
Better still, a return to profitability led many malpractice insurance companies to send dividend checks or other rebates back to policy holders last year. That seems likely to happen again this year.
So, happy days are here again, right? Not so fast. The malpractice market is notoriously turbulent. But in good times or bad, there are steps you can take to reduce your own burden. Take-or-leave it medical liability insurance is rare. Most physicians do have choices; shopping for malpractice coverage is like shopping for anything else: Let the buyer beware.
Not so stable
As premiums are stabilizing in most areas, physician-owned malpractice insurers are getting healthier. These companies now comprise some 60 percent of the market. Many, including The Doctors Company, are organized as mutual insurance or reciprocal companies. All of them have physicians on their board of directors or in other leadership roles. Although they are subject to the same market forces as any other insurer, these outfits tend to be physician-friendlier, so it’s welcome news that they are thriving.
But regardless of who owns the insurance company, the current state of affairs remains uncertain. Only time will tell how long this buyer’s market will last. After all, it was just three or four years ago that premium rates were climbing by double and triple digits annually. Options like starting self-funded risk-retention corporations and setting them up on tiny foreign islands beyond the reach of U.S courts, or just going bare without any coverage, started looking like reasonable solutions to some.
“The current situation is a stable state but not a satisfactory state of affairs,” says Richard E. Anderson, MD, CEO of The Doctors Company.
“It’s a heck of a lot better today than it was in the first part of the decade, but malpractice is still very expensive,” says Anderson, a former practicing oncologist whose physician-founded firm represents some 34,000 physicians in several states.
Anderson has good cause for concern. Despite recent reductions, insurance rates remain stubbornly high. Obstetricians in Dade County, Fla. — still ground zero of the nation’s medical liability crisis — pay as much as $275,000 a year for standard claims-made policies that cover $1 million per claim and $3 million in aggregated claims. Even in markets with lower rates, the cost of medical malpractice insurance continues to eat away at tight profit margins.
Surveys by the Medical Group Management Association (MGMA) estimate that medical professional liability insurance consumes about 2 percent of medical revenue at multispecialty groups. But that figure is only a national median; the cost can differ greatly by specialty and region. Add in the fact that about 94 percent of a typical medical practice’s payments come from insurance contracts, then figure in the rising costs of everything from vaccines to employee health benefits; suddenly, those few percentage points of profit slipping away to medical malpractice insurance seem more draconian.
One of the most worrisome trends for Anderson and others in the insurance industry is an uptick in the average award made to successful malpractice plaintiffs. True, claims frequency (how often claims are filed) appears stable. Most plaintiffs still drop their cases before going to court, and doctors win most of the cases that do make it to trial. But another important measure — claims severity (the damages paid per malpractice case settlement) — keeps creeping higher.
“Claims severity keeps climbing if for no other reason than because of the rising cost of healthcare,” Anderson says. In other words, when courts or parties to out-of-court settlements compute an injured patient’s medical costs, the tally gets higher each year. It’s climbing at a little more than 5 percent a year — about the same rate as annual medical inflation as computed in the U.S. Labor Department’s Consumer Price Index.
It’s anybody’s guess as to how much longer the respite from jaw-dropping — and profit-depleting — annual premium hikes will last. In the meantime, physicians would be wise to take advantage of the current buyer’s market (a “soft” market in industry jargon) for malpractice insurance.
