Santa Monica, CA — The nation’s largest medical malpractice insurer, GE Medical Protective, has admitted that medical malpractice caps on damage awards and other limitations on recoveries for injured patients will not lower physicians’ premiums.  
 
The insurer’s revelation was made to the Texas Department of Insurance (TDI) in a regulatory filing obtained by FTCR.  The revelation was contained in a document submitted by GE Medical Protective to explain why the insurer planned to raise physicians’ premiums 19% a mere six months after Texas enacted caps on medical malpractice awards.  In 2003, Texas lawmakers passed a $250,000 cap on non-economic damage compensation to victims of medical malpractice caps after Medical Protective and other insurers lobbied for the change.

According to the Medical Protective filing: “Non-economic damages are a small percentage of total losses paid.  Capping non-economic damages will show loss savings of 1.0%.”  The company also notes that a provision in the Texas law allowing for periodic payments of awards would provide a savings of only 1.1%.  The insurer did not even provide its doctors that relief and eventually imposed a rate hike on its physician policyholders.

The Medical Protective document can be downloaded from: http://www.consumerwatchdog.org/insurance/rp/rp004689.pdf

“When the largest malpractice insurer in the nation tells a regulator that caps on damages don't work, every legislator, regulator and voter in the nation should listen,” said FTCR’s Executive Director Douglas Heller.  “Medical Protective’s rate increase and this smoking gun document prove that the insurance industry cannot be trusted on the issue of malpractice caps.”
 
Medical Protective and other supporters of medical malpractice caps have repeatedly argued that damage awards are the primary reason for skyrocketing medical malpractice premiums.  For example, in a March 2004 report. GE Medical Protective stated that capping non-economic damages is a “critical element [of reform] because in recent years we have seen non-economic damages spiraling out of control.” [from Health Care Crisis: Causes and Solutions]  

The Texas rate increase and the actuarial data submitted by the company contradicting the oft-stated importance of caps should lead policymakers to look to insurance regulation, rather than malpractice caps, as a solution to high premiums, according to FTCR.

“While medical malpractice caps limit the rights of injured patients, they do not lower doctors’ premiums.  If lawmakers and physicians want to reduce costs, they should start fighting to reform insurance companies rather than restrict patients’ rights,” said Heller.

The nonpartisan FTCR pointed to the success of regulatory intervention in California in fighting planned medical malpractice rate hikes. Since 2003, the California Department of Insurance and FTCR have stopped $50 million in rate hikes proposed by the largest medical malpractice insurers, using Proposition 103, the state’s insurance regulation law enacted by voters in 1988.  
 
As in Texas, California has a $250,000 cap on damages (California’s limits, however, have been in place since 1975).  And, as in Texas, large California insurers have proposed major rate hikes on doctors in recent years despite the caps.  
 
GE Medical Protective sought a 29.2% rate hike in California.
 
However, because of California’s system of insurance regulation, FTCR was able to challenge the hike resulting in the company reducing its rate proposed increase by 60%.  Unlike California’s system, the Texas Insurance Commissioner, who disputed the need for Medical Protective’s increase in that state, does not have the regulatory authority to block inappropriate insurance increases.   
 
“In California, Texas and throughout the country, malpractice insurers like Medical Protective continue to push for higher premiums for doctors, regardless of whether or not the state has caps on damages.  Insurance regulation, not caps, has been the only successful weapon in the battle against skyrocketing premiums,” said Heller.
 
Not the First Industry Admission That Caps Fail

In 1986, after insurers and doctors lobbied for, and Florida lawmakers enacted, a cap on non-economic damages for medical malpractice claims, insurers Aetna and St. Paul increased doctors’ premiums.  The companies argued that, despite earlier promises, malpractice caps do not actually lead to savings for doctors, much in the manner of Medical Protective in its recent Texas filing.

According to a St. Paul Insurance company study provided to the Florida Department of Insurance at the time:

“The conclusion of the study is that the noneconomic cap of $450,000, joint and several liability on the noneconomic damages, and mandatory structured settlements on losses above $250,000 will produce little or no savings to the tort system as it pertains to medical malpractice.”

“Time after time insurers present caps as the panacea for high insurance rates only to argue that caps actually have a negligible impact when it comes time to send doctors the bill,” concluded Heller.

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