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Center for Justice and Democracy
80 Broad Street, Suite 1600 New York, New York 10004 www.centerjd.org | centerjd@centerjd.org 212.267.2801 | Fax: 212.764.4298 |
|
Center for Justice and Democracy
80 Broad Street, Suite 1600 New York, New York 10004 www.centerjd.org | centerjd@centerjd.org 212.267.2801 | Fax: 212.764.4298 |
BACKGROUNDER
NEW STUDY: Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry
Leading Attorneys General Challenge Insurance Industry
The insurance industry has argued that patients who file medical malpractice lawsuits are causing high losses for insurers. Medical malpractice insurers state that to recoup money paid to patients, they are being forced to raise doctors’ insurance rates or, in some cases, pull out of the market altogether.
A new report, Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry, disputes the insurance industry’s assertion, finding that doctors have been unnecessarily price-gouged for several years as insurance industry surpluses have ballooned to unprecedented levels. AIG, under investigation by state and federal authorities for its business practices, and HCI, a subsidiary of HCA, the largest for-profit hospital chain, are among the worst offenders.
Attorneys Generals Respond:
In a statement issued in response to the study, Connecticut Attorney General Richard Blumenthal called for “much tougher, more aggressive oversight to prevent and punish profiteering.… Federal and state regulators should thoroughly scrutinize recent rate increases and take appropriate corrective action.”
Missouri Attorney General Jay Nixon said that the Report, “call[s] into question much of what the medical malpractice insurance industry has been saying publicly during the past several years. There is no excuse for malpractice insurers doubling their rates while their claims payments decrease.”
WHAT DOES THE REPORT FIND?
This report finds that over the last five years, malpractice claims payments have actually gone down in real terms while rates have risen significantly. It also finds that incurred “losses” that medical malpractice insurers predict they will pay in the future – the alleged basis for current rates hikes - are down. In fact, some malpractice insurers substantially increased their premiums while both their claims paymentsand their projected future claims payments were decreasing. Because of this, the leading malpractice insurers have increased their surplus by more than a third in only three years, and they are now charging more for malpractice insurance than either their actual payments in malpractice cases or their estimated future payments in malpractice cases would justify.
WHAT DATA WAS EXAMINED IN THIS STUDY AND WHY?
The report is based primarily on data from the 2004 Annual Statements of the 15 largest AM Best-rated medical malpractice insurers in the United States. Annual Statements are filed under oath with state insurance departments. The companies analyzed include both investor-owned stock companies, such as AIG-affiliate Lexington Insurance Company, and doctor-owned mutual companies, such as ISMIE Mutual Insurance Company in Illinois. All are well-established companies with long claims histories.
WHY WERE ANNUAL STATEMENTS EXAMINED?Annual Statements were examined because they are the only documents filed by insurance companies that not only contain the insurer's estimate of how much it will ultimately pay out in claims but also contain hard data on how much the company actually paid out in claims and took in in premiums.
In contrast, rate filings (which contain requests for rate hikes) contain mostly estimates, not hard data, and the estimates insurers make in rate filings have in the past proved to be wildly overstated.
In addition, some insurers are not required to file rates with the states, and other insurers take the position that the data in the rate filings should be kept confidential. So the Annual Statements are the best source of hard, objective data as to how insurers are doing.
HOW IS THIS REPORT DIFFERENT FROM OTHER INSURANCE STUDIES THAT HAVE PREVIOUSLY BEEN RELEASED?This analysis is based on hard, objective, verifiable, public data to which the insurers themselves have sworn, and done so in a setting where they are not trying to “get” something, such as a rate hike (in a rate filing) or "tort reform" (lobbying lawmakers). These data have not been comprehensively examined before. In contrast, the other “data” on which the insurance and medical lobbies rely are either largely estimates or are unverifiable, or both.
WHO RELEASED THE REPORT?
The report was commissioned by the Center for Justice & Democracy and is co-released by a coalition of national consumer groups. In addition to the Center for Justice & Democracy, these groups are: Alliance for Justice, Consumer Federation of America, Public Citizen, USAction and U.S. PIRG.
WHO IS THE REPORT’S AUTHOR?
The report’s author is Jay Angoff. Mr. Angoff practices insurance law with Roger Brown & Associates in Jefferson City, Missouri.
He formerly served as insurance commissioner of Missouri and chaired Missouri’s Commission on Health Insurance Reform. He has also served as deputy insurance commissioner of New Jersey, as the director of the private health insurance group at the U.S. Health Care Financing Administration, as counsel to the National Insurance Consumer Organization, and as vice-president for strategic planning at Quotesmith.com, an internet insurance broker and quotation service.
Mr. Angoff began his career as an antitrust lawyer with the Federal Trade Commission. He has taught and written about insurance and antitrust law in both popular and legal publications.
He is a graduate of Oberlin College and Vanderbilt Law School.
July 7, 2005