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California's Prop 46 could boost medical professional liability rates

California's Prop 46 could boost medical professional liability rates

Passage of California's Proposition 46 could result in higher medical professional liability insurance rates, according to a study released by A.M. Best Co. Inc. on Tuesday.

If voters approve Proposition 46 on Nov. 4, the state's current $250,000 cap on noneconomic damages for pain and suffering awards established by the Medical Injury Compensation Reform Act of 1975 would increase to $1.1 million and be indexed annually based on inflation.

Since MICRA became law, the California Supreme Court has upheld the constitutionality of the cap.

“If enacted, this proposition is likely to have a broad effect on the citizens of California, the medical community and trial lawyers, as well as insurance companies providing MPL coverage in California,” said Oldwick, New Jersey-based Best in “Potential Turbulence Ahead in the Wake of California's Proposition 46.” Best said this would be “particularly true as it pertains to premiums charged to physicians, loss frequency, loss severity, open claims, and potential changes in average indemnity losses and loss adjustment expenses.”

Best surveyed MPL underwriters participating in the California market concerning the impact of Proposition 46's passage.

“Although survey results were incomplete, the vast majority of respondents agreed that if Proposition 46 is passed into law, MPL rates will increase,” with some respondents suggesting that the new law would also lead to an increase in physician retirements, further consolidation among physician groups into hospitals, and the exacerbation of an already existing shortage of physicians.

“Based on the survey results, 92.6% responded that an overall base rate increase of more than 10% would be necessary if Proposition 46 is passed,” said Best.

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