Illinois’ medical malpractice insurers face an 18% jump in costs following the state Supreme Court’s decision earlier this month to strike down a law limiting jury payouts, according to a study released Monday by Milliman Inc.

The consulting firm said the recent removal of caps on malpractice awards would lead to higher costs per malpractice claim, on average. The number of people suing their doctors also is likely to rise, the firm said.

“The magnitude of the estimated increase is largely a reflection of the tort environment in Illinois,” Chad Karls, a principal at Seattle-based Milliman, said in a statement. “In Illinois, claim severities have been among the highest in the country.”

The state Supreme Court’s Feb. 4 ruling struck down a 2005 law that capped jury awards for pain and suffering and other “noneconomic” damages to $500,000 per case for physicians and $1 million for hospitals.

The impact on the insurance rates that doctors pay, however, is less clear.

Insurers “were skeptical from the beginning that the legal reforms in Illinois would hold,” so a sharp rate increase as a result of the court’s decision is unlikely, said Susan Forray, a consulting actuary for Milliman.

But if the court had upheld the caps on damages, “we believe that skepticism would have dissipated and been reflected in possible rate decreases in the state,” she said.

Separately, the Illinois Department of Insurance on Saturday said other measures included in the 2005 malpractice reform law, and also struck down by the court’s ruling, had helped stabilize runaway medical liability rates. Those reforms gave regulators stronger oversight and required insurers to disclose more about how they set rates.

That helped stoke greater competition in Illinois, where Chicago-based ISMIE Mutual Insurance Co. has more than a 50% market share. In 2008, 19 firms wrote a significant amount of malpractice insurance premiums in Illinois, up from 14 in 2005.

The Illinois Department of Insurance urged insurers to voluntarily continue complying with those now-scuttled rules.

Mike Colias writes for Crain’s Chicago Business, sister publication of Business Insurance.