IRMI Supports Penn. Lawyers; Insurers to Blame for Malpractice Cost Rise

January 3, 2002

The International Risk Management Institute (IRMI) has issued a statement supporting the contentions of the Pennsylvania Trial Lawyers Association(PaTLA) that the insurance industry's own business practices are responsible for its financial losses from medical malpractice coverage.

According to the IRMI, a decade long strategy to increase market shares resulted in "consistently underpriced" insurance policies which led, in turn, to rising financial losses. The report states that, "Regardless of the level of risk management intervention, proactive claims management, or tort reform, insurers will lose money" if they continue their pricing practices.

The current crisis in Pennsylvania's medical malpractice insurance market has prompted Governor Mark Schwieker to call for legislative reform, and to order a six month moratorium on surcharge payments by those doctors affected by the lack of coverage (See IJ Website Dec.27 & 31)

The analysis states, "They [the malpractice insurers] were driven more by the amount of premiums they could book rather than the adequacy of premiums to pay losses." A.M. Best has estimated medical malpractice payments for 2000 at 40 percent higher than premium revenues.

The IRMI bulletin quoted Clifford A. Rieders, PaTLA president as stating that "We have been saying for months that rising medical errors are the cause of this problem. Now the insurance industry itself is pointing to patient safety issues as a primary problem."

It noted that emergency medicine is one specialty that insurers are wary of, due to the "potential for catastrophic outcomes" from misdiagnoses and/or premature discharge. Rieders indicated that, "It is no coincidence that fatalities from medical errors have risen from the eighth to the third leading cause of death over the past three years. This is why patient safety must be the centerpiece of the solution."

Preventable medical errors such as misprescribed or improper doses of medications, surgical errors, and laboratory mistakes are responsible for up to 100,000 deaths nationwide per year. As a result of these factors, some medical malpractice insurers are imposing strict guidelines for covering physicians, setting standards that doctors have no more than one claim during the previous five years, or limitations on prior medical malpractice awards and settlements.

These practices are similar to pricing structures for automobile insurance which charge higher rates to drivers with poor records. "It has long been PaTLA's policy that all med mal premiums in Pennsylvania be experience rated," Rieders stated. "Doctors who repeatedly commit medical errors need to be penalized within the marketplace."

IRMI said that other states were also affected. "West Virginia, Texas and Florida -- all tort reform states -- are currently addressing similar medical malpractice situations. But Massachusetts, the leader in patient safety reforms and the model for medical error reduction is not facing these problems."

Rieders concluded that, "You cannot fix the problems within the medical malpractice insurance industry by taking away the legitimate rights of injured victims. Because it has never been the cause of the problem, it can never be the satisfactory solution. Controlling medical errors and stopping doctors who harm their patients is the only answer."