1. Hobbins, Debra MSN, APRN

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No!! Nein!! Nyet!! Non!! Brace yourselves-it is time to jump off the bandwagon!! In my opinion, attorneys who secure awards for innocent individuals and families whose lives have been forever changed or lost because of blatant malpractice are not the cause of skyrocketing malpractice premiums. I believe that the cause of the malpractice "crisis" lies squarely in the lap of medical malpractice insurers and their business practices. In fact, during several years of out-of-control premium increases, medical malpractice (medmal) insurance companies have enjoyed record profits and surpluses, whereas claims payouts have remained constant or even decreased (Angoff, 2005).


Unlike most insurance companies, med-mal companies depend heavily on returns from their investment of premiums, not the premiums themselves. Insurers' inflated payout projections, poor returns on investments in this post-9/11 low-interest-rate economy, and the investment climate in general, are the real cause of the medmal-manufactured "crisis" (Angoff, 2005; Black, Silver, Hyman, & Sage, 2005).


Angoff (2005) presents damning evidence provided by med-mal insurers themselves to validate my position. These data, an analysis of 5 years of annual reports of the 15 largest U.S. med-mal insurers, reveal that the med-mal insurance companies have been defrauding and pricegouging doctors, deceiving policy makers, and misleading patients and the nursing profession. Their own data reveal the following:


1. The amount collected in premiums almost doubled (120%), whereas claims payments remained flat or declined (<6%).


2. Premiums substantially increased, whereas claims payouts decreased, and some insurers actually reduced future payout projections.


3. Record surpluses accumulated over the last 3 years-more than twice the amount the National Association of Insurance Commissioners deems adequate to function as a reserve cushion, over and above the amount insurers set aside to pay estimated future claims.



It is clear from these data that during the past several years, physicians have been overcharged, whereas investors have reaped profits.


Other insurer-related factors have contributed to rising med-mal insurance rates. Insurance company profits are determined by incurred losses divided by earned premiums. Incurred losses are simply insurers' estimates of the amount that will be paid out in claims in a given year. Insurers do not use generally accepted accounting principlesto estimate projected losses, contributing to increased med-mal rates. Incredibly, methods for determining these losses are not governed by any set standards, giving insurance companies almost total freedom to determine what their losses will be-kind of like the fox minding the henhouse.


Another factor in rising med-mal rates is the insurance industry's exemption from antitrust laws that allows them to agree on prices, to raise prices in concert, and to engage in other anticompetitive activities that are illegal in other industries. In a free-market economy, this is appalling.


A lesser known factor in med-mal premium hikes is the fluctuation in reinsurance rates. Reinsurance is basically insurance for insurance companies, purchased to protect them against losses above a certain amount. Reinsurance is an international market. Prior to 9/11, rates were already increasing. After 9/11, tied up with international events unrelated to malpractice in the United States, significant rate increases followed. There is no evidence to support linking attorneys or malpractice awards to the current medical malpractice "crisis" (Angoff, 2005).


I rest my case.




Angoff, J. (2005). Falling claims and rising premiums in the medical malpractice insurance industry (pp. 125). Commissioned by Center for Justice & Democracy, New York. [Context Link]


Black, B. S., Silver, C., Hyman, D. A., & Sage, W. M. (2005). Stability, not crisis: Medical malpractice claim outcomes in Texas, 19882002. Journal of Empirical Legal Studies, 2, 207259.. [Context Link]