ISMIE in Stride with Leading Experts
National Reports Affirm ISMIE's Direction in Confronting Med Mal Crisis
In a world of too many acronyms, some are worth our attention. AAA, GAO and WRI represent agencies (see box, page 2) that have tackled the complexities of medical malpractice liability in exhaustive reports. ISMIE carefully monitors the pulse of these activities to ensure that we advocate responsibly and vigorously for our insureds. Now it's clearer than ever. ISMIE's base of expertise to craft a reform agenda on behalf of policyholders aligns with views held by credible, national experts. Here we also note an opposing opinion. In any case, these highlights reflect issues important to ISMIE and our insureds.
AAA: Apt Analysis
"Causes of the Medical Liability Insurance Crisis" are addressed in this March 13, 2003, report by the American Academy of Actuaries (AAA) to the United States Senate Committee on Appropriations and its subcommittees. Located in Washington, D.C., AAA is a non-partisan agency that prepares objective testimony for Congress and works closely with state officials on issues related to insurance.
The report provides authoritative comment on issues related to the availability and pricing of medical malpractice insurance. Notably, and solidly aligned with ISMIE's experience, the report documents changes in the market over the last decade that led to unavoidable rate increases. Among the factors reported are a dramatic increase in claims severity and the rising number of large claims. The report states, "The bottom line is that these changes require insurers to increase rates if they are to preserve their financial health and honor future claim payments."
In addition, the report debunks misconceptions about the insurance industry and medical malpractice insurance coverage, including:
- "Insurers are increasing rates because of investment losses, particularly their losses in the stock market."
- "Companies operated irresponsibly and caused the current problems."
- "Companies are reporting losses to justify increasing rates."
In other testimony this year for the Ohio Medical Malpractice Commission, AAA observes that a coordinated package of tort reforms is more likely than individual reforms to achieve
savings in malpractice losses and insurance premiums. They noted that:
- A cap on non-economic awards (such as California's MICRA cap of $250,000) is a key reform component.
- Claim severity (or frequency) changes are unlikely to be eliminated, but they may be mitigated due to coordinated reform.
- Tort reform should reduce insurer concerns regarding large, subjective non-economic damage awards and make the loss environment more predictable.
These non-partisan reports eloquently affirm the content of ISMIE's local and national advocacy messages.
GAO: Good Effort
The General Accounting Office (GAO), the investigative arm of the U.S. Congress, published an extensive, although inconclusive, report at the end of July. The GAO studied the medical liability insurance market in seven states (Illinois not included) to uncover the reasons for skyrocketing premiums. The title of the report, "Multiple Factors Have Contributed to Increased Premium Rates" pretty much tells the story. And the report confirmed what ISMIE has known for years: medical liability premiums have exploded in some states and for some specialties due to hefty losses on medical malpractice claims.
Although the report fell short of recommending action to curb premiums, it noted, "A cap on non-economic damages may decrease insurers' losses on claims by limiting the overall amount paid out by insurance companies, especially since non-economic damages can be a substantial portion of losses on some claims."
WRI: Wrong-way
| "States with limits of $250,000 or $350,000 on non-economic damages have average combined highest premium increases of 12-15 percent, compared to 44 percent in states without caps on non-economic damages." - U.S. Department of Health and Human Services |
Weiss Ratings Inc. (WRI), which issues ratings on insurance companies and financial institutions, issued a report this summer that was immediately recognized as a bogus analysis of the medical liability crisis. The Weiss report contended that if only insurers better managed their financial reserves, then drastic increases in premiums could be avoided.
WRI has been chastised by credible authorities for irresponsible manipulation of data. According to a press release issued by the Physician Insurers Association of America, "…the conclusions Weiss strives to assert run counter to all those previously reached by highly reputable, long-standing quantitative analytical experts such as the Congressional Budget Office; the Joint Economic Committee of the U.S. Congress; Standard & Poors; American Academy of Actuaries; Tillinghast, Milliman USA; and the U.S. Department of Health and Human Services."
Trend Watcher, Trend Leader
ISMIE's years of experience confirm that the impetus behind escalating premium rates is claims severity, fueled by non-economic damage awards. That's why ISMIE is a strong supporter of S.11, the Patients First Act of 2003, with its cap of $250,000 on non-economic damage awards. After falling short of votes on a motion to proceed in July, the measure is gaining momentum and will be reconsidered in Washington this fall.
When it comes to advocating on behalf of our policyholders, ISMIE gets it right. We'll inform our policyholders about issues that affect them. We'll provide an authoritative voice to champion medical liability reform. In other words, ISMIE will be there for our policyholders, when it matters most.
Acronyms at-a-glance
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