Posted on Thu, Jun. 19, 2003
A report said medical insurers faced 2 more years of trouble. It blamed the legal system, but said no easy cure existed.
By Josh Goldstein
Inquirer Staff Writer
A new report on the nation's medical malpractice insurance
crisis predicts at least two more years of continuing financial problems for insurers.
The report from Conning Research & Consulting Inc. found that the crisis could threaten the nation's health-care system unless effective resolutions were found.
"Unfortunately, there is no single, easy-to-implement solution to this complex, emotionally charged situation," the report states.
The Conning analysis of the malpractice crisis blames the legal system for the financial problems of malpractice insurers - and consequently buffeting doctors and hospitals with sharp premium increases in recent years. The report said the problem is the growing size of payouts on malpractice suits.
"While we find a lower level of investment income [for malpractice insurers], we cannot envision the conditions required for investment income to offset the staggering level of underwriting losses," it says.
Conning - which predicted the current malpractice insurance crisis in 2000 - found that the size of losses increased by 50 percent between 1997 and 2001.
Conning found that only three of the nation's 25 largest malpractice insurers made money in 2001 on premiums after paying claims and defense costs.
"Conning believes that the medical malpractice insurance industry will continue to experience a period of large losses despite recent price increases," the report said.
That finding does not shock lawyers who represent injured patients since Conning is indirectly owned by Swiss Reinsurance Co., of Zurich.
"It doesn't surprise me that an insurance-funded group fails to blame insurance companies for this problem," said Robert J. Mongeluzzi, president-elect of the Philadelphia Trial Lawyers Association.
Conning, of Hartford, Conn., provides research and consulting services to the financial-services industry.
Because of high losses on claims, insurers are unable to forecast losses or properly price malpractice policies, the report said.
"Pennsylvania continues to be plagued by a lack of predictability, stability and consistency in what constitutes malpractice and what it is worth," Sam Marshall, president of the state insurance federation, said.
In Pennsylvania, New Jersey, and across the nation, doctors, hospital administrators and insurance executives have called on state legislatures to limit damages for pain and suffering and other "noneconomic" losses.
"Caps are a simple and obvious means of taking costs out of the system and bringing predictability to the inherently unpredictable question of how much pain and suffering is worth," Marshall said.
But he added that other changes, such as creating a special court to handle all malpractice cases, would also relieve the problem.
Mongeluzzi, the Philadelphia trial lawyer, said he was skeptical that doctors would see any savings from damage caps.
"If you think for one moment that, if caps were passed and actually resulted in reduced payments, the insurers would pass any saving on to doctors, I have a bridge I'd like to sell you," he said.
Noneconomic damage caps are just one of the possible cures to the problem listed in the Conning report. And the report contained the caveat that, "for any solution to work, all stakeholders need to be considered (and consulted)... . Simply capping jury awards may be unacceptable to plaintiffs and their attorneys."
Regardless of the solution, Conning pointed out that unstable, financially unhealthy malpractice insurers could harm health care.
"A functioning medical malpractice insurance industry is an integral cog in the nation's health-care system," the report stated.
For example, in Pennsylvania, doctors cannot practice medicine without malpractice insurance.
Other possible legal changes Conning said might fix the problem included:
Limits on plaintiff lawyers' contingency fees.
Shorter time period in which to file a malpractice suit.
Payment of damages over time rather than all at once.
"Conning forecasts no improvement in industry loss ratios for at least the next two years," said Michael Weinstein, director of research at Conning. "The implication is the prospect of de facto, technical insolvency" for the malpractice insurance industry.