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Study: Malpractice rates climb while payouts decline
Report does not take into account important costs and distracts from legal reform, critics say.
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Rates for malpractice are soaring even as insurance companies are paying less money to settle claims, according to a study released Thursday by a consumer advocacy group.
Sky-high malpractice premiums are a critical problem in Wayne County, which bears the second-highest rates in the nation. Those premiums are driving doctors from the already-underserved region.
The new study from New York-based Center for Justice & Democracy found that major malpractice insurers collected more than twice as much in premiums between 2000 and 2004, while the money they paid in claims rose less than 6 percent. The group contends the difference has allowed the nation's leading insurers to increase their surpluses by more than a third in just a few years.
"There's no rational basis for these rates," said Jay Angoff, a study consultant and former state insurance commissioner of Missouri. "Their losses are going down and their premiums are going up. It's a great business to be in."
The study was compiled from regulatory filings by 15 leading insurance companies submitted to state regulators.
Skeptics , which include the Wayne County Medical Society, say it leaves out important factors and draws attention away from the need to reform the legal system.
"This is not the first report I've seen like that, and I hold them all suspect," said Medical Society Executive Director Adam Jablonowski.
The report is the latest stab in the fight over malpractice insurance that's pitted doctors, insurance companies and trial lawyers against each other.
Insurers say they're raising rates to keep up with the rising cost of medical claims. Doctors blame trial attorneys for driving up rates with frivolous lawsuits. And attorneys say their lawsuits are a legitimate response to often-fatal medical errors. About 98,000 Americans die each year because of doctors' errors, according to the national Institute of Medicine.
In Wayne County, the most expensive premium for a general surgeon last year reached $194,000 for $1 million in coverage, according to the trade journal Medical Liability Monitor.
That's compared to $63,000 a doctor would pay for the same coverage in Grand Rapids.
Experts haven't been able to pinpoint why Wayne County's rates are so costly, though they say the money paid per claim is relatively high.
However, simply taking the overall claims and payouts doesn't figure in factors such as legal costs of malpractice cases or investment income that been lost by insurance companies, said Lawrence Smarr, president of the Physician Insurers Association of America, an insurance industry trade group.
In addition, Smarr said, premiums are based on future estimates, not current payouts. So today's rates are based on claims anticipated eight to 10 years from now, he said.
"The information is worthless," he said. "All this does is distract from tort reform. They're saying 'Don't worry, be happy. There is no crisis.'"
Angoff says the rate of increase is far higher than even the insurance companies' projections for future years. And his study, while leaving out companies' costs, also doesn't factor in added income, including that from investments.
The study's findings got the attention Thursday of Michigan's highest insurance official.
Linda Watters, Michigan's financial and insurance services commissioner, called the study disturbing and questioned the small amount that companies appear to be paying on claims relative to what they charge for premiums.
"If these carriers truly have loss ratios that are this low and yet they are still increasing rates, one has to wonder if they're gouging," Watters said in a prepared statement.
You can reach Sharon Terlep at (313)223-4686 or sterlep@detnews.com.
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