Physicians’ insurer to lower premiums
By M. William Salganik
Maryland’s largest malpractice insurer is seeking to cut its premiums by 8 percent for 2007 – a sharp contrast to 2004 and 2005, when hefty premium increases provoked waves of physician protests and pushed the state legislature into special session to enact premium subsidies.
The rate reduction would be the insurer’s first across-the-board cut since at least 1992, though doctors won’t see a drop in premiums due this month to Medical Mutual Liability Insurance Society of Maryland.
That’s because the state subsidies decline each year over the four-year life of the program, canceling out the premium rate decrease.
Med Mutual attributed next year’s across-the-board cut to a falloff in the number of claims; it follows a year of stable rates.
That marks a stunning reversal from the preceding two years, when rate increases of 28 percent and 33 percent catapulted the issue to the forefront of the state’s political agenda and ignited a bitter feud between Gov. Robert L. Ehrlich Jr., who wanted to tighten rules for malpractice claims, and the legislature’s Democratic leadership.
The two-year pause in rate escalation makes any further action on malpractice in next year’s General Assembly session highly unlikely, both sides say.
The rate reduction shows that “the huge run-up in rates was based on a one-year blip in claims.”? said state Sen. Brian E. Frosh, the Montgomery County Democrat who chairs the Judicial Proceedings Committee. “Today, it looks like that was anomalous, not a trend.”?
“Until there’s another crisis, it’s a dead issue.”? agreed Sen. Andrew P. Harris, a Baltimore County Republican and anesthesiologist who supports changing the rules. “It isn’t going anywhere.”?
Dr. Martin P. Wasserman, executive director of MedChi, the professional society for Maryland’s doctors, said changes in the rules are still needed.
He said MedChi would seek some incremental changes in liability laws in the 2007 session – on qualifications of expert witnesses and on allowing doctors to apologize to patients without the regret being used as evidence – but “I don’t think either will be sufficient to end liability concerns.”?
Despite the rate reduction, Wasserman said, the cost of malpractice insurance is still a major factor in a cost squeeze in which other overhead costs, such as rent and staff, are going up, and payments from insurers are going down.
Under the new rates, according to Med Mutual’s rate filing, base premiums in Baltimore for an obstetrician would be $139,474 a year; for an abdominal surgeon, $64,636; for a pediatrician who performs no surgery, $17,009.
The state subsidy will cover 17 percent of the cost in 2007; this year the subsidy covered 25 percent. Rates for individual doctors can vary based on whether they have had claims against them; rates also are somewhat lower in different parts of the state.
The high premiums “forced me out of private practice.”? said Dr. Scott Maizel, a surgeon who shut his own office in Rosedale at the end of last year and is now employed by Greater Baltimore Medical Center in Towson. “It was the No. 1 escalating cost. Then the landlord wanted me to sign on the dotted line for another three years with a 5 percent increase a year.”?
He said malpractice premiums alone consumed a third of his gross income.
Medical Mutual’s payouts, including defense costs as well as payments to injured patients, grew from $47 million in 2000 to $93 million in 2003. Since then, however, Med Mutual’s costs slipped to $78 million in 2004 and $54 million in 2005, according to testimony by the insurer to legislators.
“Although the average amount paid on claims is still high, there has been a moderation in the frequency of claims.”? Med Mutual told doctors in a newsletter last month.
The profitable company, which is owned by physicians, will provide the Maryland Insurance Administration with details on claims this year to support the rate cut by the end of January.
P. Randi Johnson, associate insurance commissioner, said staff and independent actuaries would review the rate request, and Med Mutual would have to adjust its rates – up or down – if regulators don’t agree that the requested rate is justified by claims experience.
Med Mutual is sending out bills based on the lower rate. The company insures about half the doctors in the state, according to the insurance administration, and an even larger percentage of those in private practice. Doctors employed at medical schools or by hospitals are generally covered under the institution’s policies.
Johnson said no other malpractice insurers have filed for rate cuts, although several others use Med Mutual’s data in their rate calculations, and have asked to see the data when it is filed.
She said one carrier, Preferred Professionals Insurance Co., which covers about 5 percent of the state’s doctors, is seeking a 5 percent rate increase, and the insurance administration is reviewing that request.
Maryland’s experience over the past few years – sharp escalation in claims in 2002 and 2003, followed by a falloff – is consistent with national trends as well.
While the average cost per claim has increased slightly, the number of claims has declined from about 10 per 100 moderate-risk doctors in 2000 to about 7 in 2005, according to a report in October by Aon Risk Consulting for the American Society for Healthcare Risk Management. Claims against hospitals, on a per-bed basis, declined similarly, the Aon study found.
Just as there was no definitive indication of the cause of the run-up in 2002 and 2003, there is no clear reason why the trends have moderated.
Gregory Larcher, a director and actuary in Aon’s Columbia office and the principal author of the study, pointed to three factors that likely all contributed.
First, he said, is so-called “tort reform.”? a changing of the legal rules under which claims are made and paid. States such as Texas and Florida, which adopted tighter limits on payouts and other new rules after the run-up, showed the biggest moderation, Larcher said.
Second, Larcher said, doctors, hospitals and insurers responded to the increase in claims by mounting more aggressive legal defense. The amount paid to plaintiffs increased only 3 percent last year, according to his study, but the amount spent on legal defense rose 17 percent.
Finally, “providers have been investing in plant and equipment”? to reduce bad outcomes, Larcher said.
Better communication with patients and better record-keeping also can reduce the number of claims and provide better defense when claims are filed, said Wasserman, head of MedChi, the state medical society.