Americans for Insurance Reform
DECEMBER 20, 2004
12:51 PM
CONTACT: Americans for Insurance Reform 
Joanne Doroshow, Laurie Beacham, 212-267-2801
J. Robert Hunter, 703-528-0062
Insurers Continue to Price-Gouge Doctors in Massachusetts Despite Dropping Medical Malpractice Payouts

NEW YORK, NY -- December 20 -- With the issue of medical malpractice and “tort reform” becoming an increasingly discussed topic, Americans for Insurance Reform (AIR) announced today the release of a comprehensive new study of medical malpractice insurance in Massachusetts, based on the insurance industry’s own data. Its findings may be startling to some:

  • First, contrary to what the insurance and medical lobbies have alleged, the last few years saw no “explosion” in medical malpractice insurer payouts or costs to justify rising rate hikes. In fact, rather than exploding, inflation-adjusted payouts per doctor have dropped for each of the last three years. Payouts (in constant dollars) have been essentially flat or dropping since 1990.
  • Second, medical malpractice insurance premiums rose faster over the last three years than was justified by insurance payouts. The hike, which began in 2000, is not connected to actual payouts. Rather, it reflects a weakened economy and losses experienced by the insurance industry’s market investments.

According to Joanne Doroshow, Executive Director of the Center for Justice & Democracy and AIR co-founder, “These findings undermine one of the central claims of interest groups who seek to blame the legal system for doctors’ insurance woes. In fact, the study shows that the causes of and solutions to this crisis lie not with the legal system (i.e., ‘tort reform’) but with reforming regulation of the insurance industry, which has been unfairly charging doctors excessive rates to make up for their own investment losses.”

The study by AIR, a national coalition of over 100 consumer and public interest groups representing more than 50 million people, including the New England Patients’ Rights Group, Massachusetts Public Interest Research Group and the Massachusetts-based Center for Insurance Research, makes nearly identical findings to those reached in a recently-released AIR study of national trends. Specifically, the national and Massachusetts studies show that the real reasons medical malpractice insurance rates have risen so dramatically in the last two years are market forces and dropping interest rates – not, as the insurance industry claims, because of a sudden massive increase in medical malpractice jury awards or payouts, which, in constant dollars, have been decreasing for the last decade.

Linda DeBenedictis, President of New England Patients’ Rights Group, stated, “In light of this critical information, it’s ludicrous for the insurance industry to continue to deceive the public by blaming jury awards for the increase in malpractice premiums. It’s unconscionable to continue to target innocent, vulnerable victims of medical negligence by making it more difficult to receive just compensation because of the market forces of the insurance industry. We appeal to our legislators to utilize the data in this study to enact laws that will strengthen and protect the rights of medical consumers -- not weaken them.”

Author of the study, J. Robert Hunter, Director of Insurance for the Consumer Federation of America, former Federal Insurance Administrator and Texas Insurance Commissioner, said, “The current jump in prices doctors pay is a result of a combination of two insurance company practices: (1) the insurer’s aggressive under-pricing to gain market share when interest rates were high, coupled with (2) the insurer’s classification plan that charges some high-risk doctors (such as OB/GYNs and neurosurgeons) for all of the cost of the high-risk cases referred to them by all other doctors. What is crystal clear is that what did not cause this crisis was an increase in losses. There simply is no evidence of that!”

Hunter said, “There is only one way to solve this problem: reforming the insurance industry. State lawmakers must strengthen state insurance laws in order to end the boom and bust swing from illegal overpricing, such as the rates doctors are being asked to pay today, to illegal and inadequate underpricing, which will be seen when the market softens later in the cycle. Fortunately, the hard market price jump is behind us and we are now entering the softer market so legislators have a decade or so to grapple with how best to do this before the next hard market hits the nation.”

The full study can be found at: