Medical malpractice insurance trends

By Susan Green

Medical costs are on the rise nationally, and so are malpractice insurance premiums. Ohio is one of 12 states in which the rising medical malpractice insurance premiums are resulting in a crisis, according to a recent study by the American Medical Association. Many doctors are seeking early retirement or leaving the profession.

The Ohio State Medical Association reports that insurance premiums increased at an average rate of 41 percent over the past two years with some as high as 86 percent. Rates are predicted to rise 20 percent next year.

This year, malpractice insurance premiums rose 340 percent for Ohio University Osteopathic Medical Center, and premiums for next year will rise an additional 30 percent to 40 percent despite little change in the number of malpractice claims.

Factors contributing to the insurance crisis:

• Market factors are the primary reason for the crisis. The stock market declined and interest rates dropped. Medical malpractice insurance companies invest the premiums paid to them by doctors and hospitals. Throughout most of the 1990s, investments were earning more than 10 percent annually. This allowed companies to remain profitable and reduce their premiums or hold them steady.
• When the financial markets declined, premiums were too low to cover expenses.
• Last year, many insurers either lost money on their investments or earned less than 2 percent, so they raised their rates.
• Malpractice insurance rates are not regulated, and tort reform laws have not yet been enacted.
• Some experts also claim skyrocketing jury awards in malpractice cases are a contributing factor. The awards have caused insurers to raise premiums in order to cover huge losses.
• One of the largest malpractice insurance companies, St. Paul Cos., announced it would no longer offer malpractice insurance after posting a $980 million loss.

Tort-reform is one of the proposed fixes for the situation. Tort-reform places limits on non-economic damages and attorney contingency fees in medical malpractice cases. On Dec. 10, the Ohio Legislature passed Senate Bill 281, tort-reform legislation. The governor is expected to sign the legislation into law before the year's end.

Susan Green is a writer with University Communications and Marketing.