Weiss Ratings

(Revised June 3, 2003)

Medical Malpractice Caps Fail to Prevent Premium Increases,
According to Weiss Ratings Study
Physicians in States with Caps Suffer 48% Increase in Median Annual Premiums
Even While Insurers Enjoy Slowdown in Payouts

PALM BEACH GARDENS, Fla., June 2, 2003 - Caps on non-economic damages have failed to prevent sharp increases in medical malpractice insurance premiums, even though insurers enjoyed a slowdown in their payouts, according to a white paper released today by Weiss Ratings, Inc., the nation's leading independent provider of ratings and analyses of financial services companies, mutual funds, and stocks.

In reviewing the impact that tort reform has had on both medical malpractice (med mal) premiums paid by doctors in three high-risk specialties1 and insurers' claim payout levels2 between 1991 and 2002, Weiss noted the following trends:

Physicians continued to suffer a rapid increase in med mal premiums despite caps: In 19 states that implemented caps during the 12-year period, physicians suffered a 48.2 percent jump in median premiums, from $20,414 in 1991 to $30,246 in 2002. However, surprisingly, in 32 states without caps3, the pace of increase was actually somewhat slower, as premiums rose by only 35.9 percent, from $22,118 to $30,056.

At the same time, among the 19 states with caps, only two of the states, or 10.5 percent, experienced flat or declining med mal premiums. In contrast, states without caps were actually better able to contain premium rate increases, with six, or 18.7 percent, experiencing stable or declining trends.

Meanwhile, the insurers enjoyed slowed increases in claims payout levels: The median payout in states without caps surged 127.9 percent, from $65,831 in 1991 to $150,000 in 2002. In contrast, the median payout grew by 83.3 percent in states with caps, from $60,000 to $110,000. Likewise, in states without caps, the median payout for the entire 12-year period was $116,297, ranging from $75,000 to $220,000, while the median payout for states with caps was 15.7 percent lower, or $98,079, ranging from $50,000 to $190,0004.

"Tort reform has failed to address the problem of surging medical malpractice premiums, despite the fact that insurers have benefited from a slowdown in the growth of claims," said Martin D. Weiss, chairman of Weiss Ratings, Inc. "The escalating medical malpractice crisis will not be resolved until the industry and regulators address the other, apparently more powerful, factors driving premiums higher."

Other Factors Contributing to the Med Mal Crisis

Weiss identified six factors driving the increase in medical malpractice rates, each of which may be exerting a greater impact on premiums than the presence or absence of caps:

Weiss Recommendations

Although the implementation of non-economic caps has resulted in a slowdown in payout increases for insurers, most insurers have not passed those savings on to physicians, continuing to jack up premiums due to other powerful pressures. Thus, caps have been ineffective in reducing medical malpractice premiums for medical professionals. To adequately address this national crisis, Weiss suggests several comprehensive steps, including:

Weiss Ratings issues safety ratings on more than 15,000 financial institutions, including HMOs, life and health insurers, Blue Cross Blue Shield plans, property and casualty insurers, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 12,000 mutual funds and more than 7,000 stocks. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.

1 Medical malpractice premiums paid by doctors in three high-risk specialties: internal medicine, general surgery, and obstetrics/gynecology. Data source: Medical Liability Monitor.
2 Data source: National Practitioner Data Bank
3 For the purposes of this analysis, the District of Columbia is being referred to as a "state" since it effectively operates as such with regard to insurance regulation.
4 Adjusted for inflation in order to evaluate figures spanning multiple years.

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Note to Editors: Read Weiss Ratings' white paper, Medical Malpractice Caps: The Impact of Non-Economic Damage Caps on Physician Premiums, Claims Payout Levels, and Availability of Coverage, online at http://www.weissratings.com/pdf/malpractice.pdf. Copies are available upon request.

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