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Insurers inflated med mal crisis: Report


WASHINGTON--A former insurance commissioner has accused the nation's 15 leading medical malpractice insurers of unnecessarily driving up health care costs by falsely claiming that a medical malpractice crisis exists and "price gouging" physicians.

Former Missouri Insurance Commissioner Jay Angoff, now an attorney with Roger Brown & Associates of Jefferson City, Mo., made his accusations in a report, "No Basis for High Insurance Rates: An Analysis of the 15 Largest Medical Malpractice Insurers' 2006 Financial Statements."

The Washington-based American Assn. for Justice, a plaintiffs' attorneys-supported research organization, commissioned the report.

"The data contained in these statements demonstrate that the premise on which the insurance industry based its 'tort reform' campaign of the last several years--that malpractice claims payments have been increasing--is false," Mr. Angoff stated in his report.

Mr. Angoff noted that insurers' net paid claims fell 14.7%, before accounting for inflation, to nearly $1.15 billion in 2006 from more than $1.34 billion in 2000.

But in an interview, Mr. Angoff said insurers that responded to a similar report and conclusions he produced on their 2004 results scoffed at the net paid claims figures. He said the insurers insisted that their incurred loss figures were more important, because those numbers factored in losses that the insurers anticipated would be much higher than their reported paid losses.

Yet, the insurers' incurred losses fell 48% to $1.35 billion in 2006 from $2.6 billion in 2003, Mr. Angoff reported. Nine insurers in the group reported drops of more than 50% of incurred losses, and two reported reductions of more than 80%, Mr. Angoff's report noted.

That means the insurers' incurred loss estimates in prior years--which drove their rates--"had to be excessive," Mr. Angoff said.

In addition, between 2003 and year-end 2006, the insurers' surplus grew 43%, the report stated.

But premiums continued to rise sharply from 2000 through 2006, Mr. Angoff noted. Insurers reported $2.38 billion of net written premiums in 2006, a 24% increase from $1.92 billion of net written premiums in 2000.

On the strength of those premiums and smaller losses, the insurers in 2006 reported a 31.4% loss ratio, which means almost 69 cents of every premium dollar went to loss adjustment expenses and profit, Mr. Angoff said. That ratio is "unsustainable over the long run," because it implies the insurers are charging "excessive rates," he said.

Some insurers are beginning to reduce their rates, but physicians should insist on rate cuts from all insurers or ask their state insurance commissioners to conduct hearings on the insurers' pricing practices, Mr. Angoff said.

"Medical malpractice insurance companies have been price-gouging doctors, padding their pockets with excessive premiums and driving up the cost of health care," said Jon Haber, chief executive officer for the AAJ, in a statement. "Cynically, these same insurance companies have been blaming high premiums on a so-called 'malpractice crisis' that doesn't exist. We have an insurance crisis, not a medical malpractice crisis."

The Rockville, Md.-based Physician Insurers Assn. of America did not return calls.