[NPInfo] A risk management/claims study on NPs - so called Tort Reform re Medical Negligence claims - CA MICRA of 1975 has done little except to enrich insurers

[np at c-zone.net]

MICRA did not lower insurance premiums in California During the insurance
crisis of the 1980s, California's 1975 law restricting the right of
injured patients to sue doctors, hospitals and HMOs for medical mistakes
and negligence was touted by the insurance industry and medical industry
as a model "tort reform" for the nation. Doctors were told that the
skyrocketing premiums they must pay to purchase malpractice insurance
coverage would be reduced if MICRA-type laws were enacted.

Studies conducted during and after the 1980s "crisis" told a different
story. The U.S. General Accounting Office, published a study of six states
that had enacted many different forms of tort law restrictions during the
"crisis" of the mid-1970s, including caps on compensation. The GAO report
showed that the price of medical malpractice liability insurance in
California had increased dramatically since the passage of MICRA. In fact,
"premiums for physicians increased from 16 to 337 percent in southern
California ... between 1980 and 1986." 1 The GAO study concluded:

While it is not possible to assess the extent to which the act [MICRA] has
had an impact on the state's malpractice situation, our analysis of key
indicators indicated that the problem is continuing to worsen in
California. 2

According to the GAO, four states (Arkansas, Florida, New York and North
Carolina) reported that the restrictions had had "little effect" on
insurance premiums. 3

A later, comprehensive review of insurance industry data spanning the
period from 1976, when MICRA took effect, through 1991, demonstrated that
its restrictions did nothing to ease the cost of malpractice insurance
premiums. The average malpractice premium per California physician was
higher than the national average in most years after MICRA's passage. The
total cost of malpractice liability insurance premiums paid as a
percentage of total health care costs was higher in California than in the
nation. Moreover, the price of malpractice coverage increased in
California after the passage of the law. Premiums grew 191 percent through
1988, when they began to fall, dropping 20 percent by 1991. The same
pattern emerged in the nation: premiums grew 331 percent through 1989,
then fell 5 percent by 1991. 4

That study concluded that MICRA was not responsible for the reversal in
premium growth; tougher insurance regulation imposed in California in 1988
-- Proposition 103 -- probably accounted for the greater reduction in
premiums witnessed in recent years. 5 But insurers still charged too much
for malpractice liability insurance in California, according to the
report; MICRA's chief effect was to enrich the insurance industry. 6

Higher profits for insurers, fewer rights for malpractice victims:

Investigations of the insurance industry's financial operations confirm
that insurers took advantage of the crises they concocted to engage in
profiteering. According to the National Insurance Consumer Organization
(NICO), medical malpractice insurers earned a 12.6 percent return on net
worth in 1987, when their complaints about the litigation explosion were
at a fever pitch. 7 This rate of return is twice that of most other
industries. Moreover, between 1975 and 1984, the entire property/casualty
insurance industry made a record-breaking profit of $75 billion, yet, due
to preferential treatment under federal tax laws, paid no federal income
tax, according to the U.S. General Accounting Office. 8

In 1991, insurers writing medical malpractice insurance in the United
States earned a return of $1.4 billion, or 15.9 percent of net worth. But
this immodest figure still underestimates the insurers' profitability. It
reflects the industry's decision to retain much more capital than is
necessary or reasonable to cover the risks they underwrite, according to
NICO. Had insurers not retained so much previous profit, the return on net
worth for America's medical malpractice insurers would have been even
higher -- 29.2 percent. This is an excessively high rate of return, one
that is more than double the profit required to reward the risk of
underwriting this insurance. 9

The 1993 study of medical malpractice insurance in California showed that
MICRA had done little more than enrich California malpractice insurers
with excessive profits, at the expense of malpractice victims. One measure
of the insurers' greed is revealed by their "loss ratios," which is the
amount estimated to be paid for malpractice claims, shown as a percentage
of premiums sold. Carriers which sell medical malpractice policies in
California had an average loss ratio of 36 percent in 1990 -- an
astounding figure for an industry which usually relies on investment
income, rather than underwriting, for most of its profits. 10

Put another way, malpractice insurance companies operating in California
paid out only 36 cents for every one dollar in premiums they took in from
physicians, hospitals and other health facilities. 11 The industry's
legendary inefficiency and bloated bureaucracy, along with excessive
profits, soak up 64 percent of premiums. And nationally, malpractice
insurance companies' profits are even more excessive. 12

Given the insurance industry's role in the "insurance crisis" of the
1970s, its behavior in the mid-1980s was predictable, and should have
elicited a stringent response from law enforcement, insurance regulators
and elected officials. But few paid attention to the conclusions of those
investigators who took the time to sift through the evidence of the chaos
that swept the insurance marketplace in the mid-1980s. A 1986 report
prepared by six state attorneys general concluded:

The facts do not bear out the allegations of an 'explosion' in litigation
or in claim size, nor do they bear out the allegations of a financial
disaster suffered by property/casualty insurers today. They finally do not
support any correlation between the current crisis in availability and
affordability of insurance and such a litigation 'explosion.' Instead, the
available data indicate that the causes of, and therefore the solutions
to, the current crisis lie with the insurance industry itself. 13

By early 1987, most of the states in the nation had enacted laws limiting
the rights of injured consumers, premiums had stabilized at sharply higher
levels, and the insurers' profits were skyrocketing. The "crisis" was over
-- for everyone except the victims.

------------------------
Footnotes
U.S. General Accounting Office, Medical Malpractice: Six State Case
Studies Show Claims and Insurance Costs Still Rise Despite Reforms
(Washington, D.C.: U.S. Government Printing Office, 1986), p. 25.
Ibid., p. 26.
Ibid., pp. 2-3.
Harvey Rosenfield, California's MICRA: Profile of A Failed Experiment in
Tort Law Restrictions (Los Angeles, Ca. June 1993), pp. 11-16.
Ibid., pp. ii - iii.
Ibid. p. 15-16.
National Insurance Consumer Organization, Medical Malpractice Insurance:
1985-1991 Calendar Year Experience (Alexandria, Va.: National Insurance
Consumer Organization, March, 1993), Exhibit 3, Sheet 1.
Statement of William J. Anderson, Director, General Government Division,
U.S. General Accounting Office, on "Profitability of the Property/Casualty
Insurance Industry," before the Subcommittee on Oversight, Committee on
Ways and Means, U.S. House of Representatives, March 13, 1986, p. 4.
National Insurance Consumer Organization, Medical Malpractice Insurance:
1985-1991 Calendar Year Experience (Alexandria, Va.: National Insurance
Consumer Organization, March 1993), pp. 8-9.
Harvey Rosenfield, California's MICRA: Profile of A Failed Experiment in
Tort Law Restrictions (Los Angeles, Ca.: Voter Revolt, June 1993), p. 15.
(See note 112 for instructions on how to obtain a copy of the report).
Ibid. Note that 1991's unusually low losses allowed California malpractice
insurers to achieve a nine percent loss ratio. Ibid., p. 15, footnote 25.
Ibid., pp. 13 - 16.
Francis X. Bellotti, Attorney General of Massachusetts, et al., Analysis
of The Causes of The Current Crisis of Unavailability and Unaffordability
of Liability Insurance (Ad Hoc Insurance Committee of the National
Association of Attorneys General, May 1986), p. 45. For a comprehensive
critique of the "litigation crisis" by consumer advocate Ralph Nader read,
"The Corporate Drive to Restrict Their Victims' Rights," Gonzaga Law
Review, Vol. 22, No. 1 (1986-1987), p. 15.
"Insuring Health Clinics," Modesto Bee, February 19, 1987, p. A16.

From: Harvey Rosenfield, Silent Violence, Silent Death: The Hidden
Epidemic of Medical Malpractice (Essential Books, 1994).

Copyright ©2007 American Medical Student Association
(800) 767-2266 • amsa at amsa.org


> Very interesting risk managment/claims study on NPs.  (January 1, 1994
> and
> December 31, 2004).  Even shows claims made to CNA/NSO by state.   Not
> surprising, as mentioned on this listserv, Florida tops them all.
>
> Go to site and click on Nurse Practitioner Claims Study.
>_http://www.cna.com/eportal/site/cna/menuitem.d90f185a736d7daf63fa2a66a86631a0
> /?vgnextoid=9f22fe4db7c19010VgnVCM1000005566130aRCRD_
> (http://www.cna.com/eportal/site/cna/menuitem.d90f185a736d7daf63fa2a66a86631a0/?vgnextoid=9f22fe4db7c1
> 9010VgnVCM1000005566130aRCRD)
>
> Greta