In less than six months, Rhode Island’s top medical malpractice insurer, NORCAL Mutual, has raised rates by 19 percent, and second-ranked ProSelect Insurance has raised rates by 15.05 percent for doctors and 38.66 percent for hospitals.
The Medical Malpractice Joint Underwriting Association of Rhode Island, the state’s malpractice insurer of last resort, just got cleared for an experience-rating change that will boost four hospitals’ premiums by an average of 23.7 percent this year.
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And the Medical Protective Co., which had sought an 80 percent hike year, has instead stopped writing policies in Rhode Island.
Given this outlook, and with both President Bush and Gov. Donald L. Carcieri making medical malpractice reform a priority, could 2005 be the year when it actually happens?
The president’s proposal, modeled after California’s 1975 Medical Injury Compensation Reform Act (MICRA), is far more aggressive than anything on the table in Rhode Island, with, most notably, a $250,000 cap on jury awards for non-economic damages.
Last year, Carcieri too proposed a $250,000 cap, but facing major opposition, he dropped it to focus on smaller changes also advocated by the Rhode Island Medical Society: trying to speed up malpractice cases, reducing interest payouts, narrowing the statute of limitations.
This year, Carcieri is pushing that same agenda, as are the doctors. Separately, state Sen. Leo R. Blais (R-Coventry) wants the Department of Health to collect detailed data on malpractice claims, and state Rep. Eileen S. Naughton (D-Warwick) wants to cut the interest paid on jury awards from 12 percent to 6 percent – both proposals considered last year.
The wild card this time is “Fair Insurance Rhode Island,” a new alliance of consumer groups, trial lawyers, social workers and one health care union.
In Rhode Island and nationwide, consumer groups and trial lawyers have long argued that insurers’ crisis talk is bogus, and that proposed tort reforms would harm the public. This year, to try to stop doctors from “agitating to skew the civil justice system,” as lawyer John Barylick put it, they’ve offered their own bill to:
– Prohibit “discrimination” against Rhode Island by multi-state insurers in what costs they allocate in their rates and the broker commissions they pay.
– Require the state Department of Business Regulation to set standards for how insurers calculate rates, including how they estimate future claims.
– Limit the highest base rate an insurer can charge – say, for ob/gyns – to five times the lowest base rate; NORCAL’s base rate for ob/gyns is now 7.8 times that for dermatologists.
– Mandate experience rating for all policies, with a surcharge for subscribers for whom claims have been paid in the last 10 years, and a discount for claim-free subscribers.
– Require the DBR to set an “appropriate” surplus level for insurers each year, then forbid rate increases if a company’s capital exceeds that level, and allow the DBR to order refunds.
– Require insurers to file detailed reports on each year’s claims, including total payouts, loss adjustment expenses for claims without payouts, and premiums and losses by specialty.
– Require the DBR to set up a Web site where doctors can get premium quotes from all available insurers.
To a great extent, the bill directly responds to allegations about NORCAL made by Jay Angoff, a former Missouri insurance commissioner and well-known critic of the industry.
Angoff alleges, for example, that NORCAL routinely overestimates future claims, citing data from 1986 to 1994 showing that predictions overstated payouts by an average of 40 percent. But Phil Hinderberger, general counsel for NORCAL, said figures from that period are misleading, because the impact of California’s insurance reforms was still unclear. Premiums were too high, he said, but NORCAL returned that money to subscribers as dividends. A company chart shows payouts averaging 23 percent a year, and as high as 37 percent.
Since then, NORCAL’s loss estimates have come much closer to actual payouts, Hinderberger said, though exact figures won’t be known until all claims are closed.
Hinderberger gave similarly detailed responses to all the alliance’s charges, stressing that NORCAL is in fact losing money in Rhode Island, even though it’s profitable in California.
As proof, Hinderberger cited NORCAL’s Rhode Island combined loss and expense ratios for the last several years: 135.8 percent of premiums in 2003, 127.2 percent in 2002, 96.2 percent in 2001, 177.2 percent in 2000, and 215.8 percent for 1999.
Asked why NORCAL doesn’t leave, Hinderberger said it’s bound by a contract with the Rhode Island Medical Society, but it’s also “committed to the long term in Rhode Island.” That’s why NORCAL is working “to provide a judicial environment where doctors can get a fair shake,” he said. “If we get to that point, the losses will come down.”
As of Wednesday, the Society had not filed its bill, though Steven DeToy, the group’s lobbyist, said it will be virtually identical to Carcieri’s. it would:
– Lower the statute of limitations for minors from age 18, to 8.
– Require suits for injuries discovered after the statute of limitations to be filed within a year.
– Require plaintiffs, when they file a lawsuit, to attach a “certificate of merit” showing an expert agrees the claim is “reasonable and meritorious.”
– Allow pre-judgment interest to accrue only after a suit is filed, and make it only 5 percent per year until the plaintiff has disclosed all his experts and the substance of their expected testimony, at which point the rate would become 8 percent. Plaintiffs now get 12 percent, accruing from the day they notify the defendant of their intent to sue.
n Stop the accrual of interest if a plaintiff delays a case, unless the defense agrees to it.
DeToy said all doctors want is to speed up the process, which now takes longer in Rhode Island – an average of 6.44 years from injury to payment, according to NORCAL – than in any other state. “The process goes on and on,” DeToy said. Rhode Island is “far outside the norm,” he said, and it needs to be brought in line with other states.
Barylick, however, said that proposal would “terribly skew the playing field against plaintiffs.” The certificate of merit requirement, especially, is “ridiculous,” he said, because it would force plaintiffs’ experts to “go out on a limb” before they’ve gained access to all the relevant evidence.
So is there room for compromise?
Barylick, who’s been testifying for years against the doctors’ proposals, is sticking to his guns.
DeToy, for his part, said doctors may support some of the alliance’s ideas, especially the data-gathering. But first, DeToy said, the Society wants to be sure any reform preserves a viable commercial market.
“That’s the litmus test,” DeToy said. “We don’t want to lose what we have of the commercial market – that doesn’t benefit anybody. If there are ways we can reduce costs through changes in insurance regulation, we’re going to give that some very serious consideration.”
