Malpractice Insurance Trends

Claims of malpractice have been leveled at physicians for millennia, but it was not until the 1970’s that insurance companies began offering policies to protect medical practitioners from litigation.  In the almost five decades since medical malpractice has become a necessity for physicians and other clinicians, but the importance of this coverage has varied due to major changes in the healthcare and insurance industries as well as governmental regulatory regime. Despite a decline in the number of malpractice lawsuits against physicians in recent years and a decline in malpractice insurance premiums, these legal actions have helped push healthcare costs up considerably.  In 2003, there were almost 17,000 paid malpractice claims totaling almost $4.5 billion.  By 2011, the number of claims dropped to less than 10,000 and producing almost $3.2 billion in payouts. This trend has helped lower the premiums for many hospitals; a recent study of almost 387 California hospitals found that their premium in 2003 was only one percent of their operational budget, but had declined to 0.6% by 2011. For most physicians in the U.S., these declining costs have likely saved them a few dollars in recent years. Medical Economics reported that the average annual malpractice insurance premium for family doctors was$12,600 in 2009 and $12,100 in 2010, but shrank to $11,900 in 2011.  For internal medicine doctors, it was $14,100 in 2009, $13,100 in 2010 and $12,900 in 2011.  Other specialties also generally saw a declining rate in this time period. Unfortunately, there are some areas of the country that experienced significantly higher rates of malpractice claims and payouts.  These were New York, Florida, Pennsylvania, Illinois, Massachusetts and New Jersey.  The malpractice claims in these six states produced almost $1.71 billion in payouts in 2010, while all of the other states’ malpractice awards only totaled $1.609 billion in 2010. In some of these states, physicians have actually chosen to forgo acquiring malpractice insurance.  Florida is one of the few states that do not require physicians to obtain coverage; however, they must possess at least $250,000 in assets to cover at least part of a judgment. According to the American Medical Association, the insurance premiums in 20 states has risen to the point that many of the practicing physicians in those states do not get coverage.  These physicians are usually in private practice as most hospitals require at least minimum coverage. For the physicians in these unfortunate parts of the country, there is also the added challenge of finding a carrier.  The courts in these states have been extremely generous to litigants, often producing multi-million dollar awards to supported claims.  This has scared off many insurance companies from offering policies or offering only policies for exorbitant rates.  For example, a malpractice policy for an orthopedic surgeon in Florida provides $250,000 in protection for almost $95,000 in annual premiums. There are some potential solutions on the horizon, however.  In some states like Florida, there are tort reform measures on the ballot which could help rein in frivolous lawsuits. Some physicians have also implemented independent measures to limit their exposure to litigation. Many of these risk-averse doctors refuse to perform high risk surgeries or see patients with traumatic injuries. To mitigate the risk themselves, many private practice physicians have also joined Accountable Care Organizations where they can obtain additional insurance protection. Finally, there is the option of obtaining work through a medical staffing agency.  These locum tenens assignments may be in any part of the country, but the firm typically provides malpractice insurance for the client, along with housing, transportation and licensure assistance.  The industry standard is a $1 million per incident and $3 million per year policy, but it is wise to discuss the specifics before entering into a contract.

Written by:  Robert Moghim, M.D., CEO- Moghim Medical Consulting Inc.

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