Insurers Admit Premiums Will Not Be Reduced In The Future

Most telling is the fact MAG Mutual’s representatives have consistently stated that even with the passage of their tort reform proposals, including severe caps on damages recoverable by a victim of medical malpractice, they cannot guarantee a premium reduction at any point in time in the future.  Other states that have recently passed draconian tort reform measures have learned after the fact a very hard lesson – insurers will never reduce premiums as a result of tort reform measures.  While a handful of states have passed some significant limitations on the rights of victims of medical malpractice, NONE of them have seen medical malpractice insurance premiums lowered. 

In Mississippi, where a contentious medical malpractice “tort reform” battle was waged during the summer of 2002, Medical Assurance Co. of Mississippi notified doctors that it would raise its rates by 45 percent in 2003 “regardless of the special session outcome” since “tort reform” does “not provide a magical ‘silver-bullet’ that will immediately affect medical malpractice insurance rates.”[34]

; b>In New Jersey, at a meeting of the New Jersey Assembly Joint Committees of Banking & Insurance and Health & Human Services on Medical Malpractice, Assemblyman Paul D’Amato asked Patricia Costanta, chairman and CEO of the MIIX Group of Insurance Companies, whether the company was promising its doctors that they would not raise premiums and would in fact reduce them, if the state passed tort reform.  Her response: “No, we’re not telling them that.”[35]

In Nevada, lawmakers were subjected to a nasty campaign by insurers and organized medicine during the summer of 2002, including the deliberate closing of trauma centers, in order to strong-arm the legislature into enacting severe caps on medical malpractice compensation.  Insurance groups fought any attempt to add a provision to guarantee lower rates should the legislation pass.  Within weeks of the law’s enactment, the insurance industry proclaimed that they would not reduce insurance rates.[36]

Insurers now say that they are “waiting to see” if caps will be upheld constitutionally, as many state constitutions prohibit caps since they directly interfere with the right to a jury trial, the right to a remedy, equal protection and/or separation of powers.

Such excuses are nothing more than a convenient cover for one undeniable fact: Insurers have never lowered rates as a consequence of “tort reform” because such measures are based on an untrue premise: that the legal system, rather than the underwriting practices of the insurance industry, is responsible for gyrations in the cost and availability of insurance. That is true now and was true during the attempt by insurers to take advantage of the last hard market cycle in the 1980s.

• Florida – Following enactment of extensive “tort reforms” in Florida in 1986, Aetna and St. Paul Marine Insurance Company said they would not reduce rates. In fact, filings by 104 insurers in Florida showed that out of 277 filings, 175, or 63 percent, showed no savings from “tort reform” while none showed savings of more than 10 percent. [37]

• In fact, after Florida passed its 1986 reforms, St. Paul conducted a study on all of its 1983 and 1984 claims to determine what effect the passed tort reform measures [including a cap on non-economic damages, elimination of joint and several liability, a change in the collateral rule and mandatory structured settlements on losses above $250,000] would have had on those claims if the law had already been in effect.  Here was St. Paul’s conclusion:

“The tort law changes effective July 1, 1986 in Florida will, hopefully, have a positive impact on loss costs for occurrences after that date.  However, to forecast the effect is highly speculative.  Our evaluation of prior losses showed little or no savings under key provisions of the law and our analysis of other provisions show no expected savings.  Our best estimate is no effect from the tort changes.”[38]

Washington – In 1986, the state of Washington enacted what was considered at the time “u>one of the most comprehensive [tort] reform bills yet.”  However, after the law passed, Washington State Physicians Insurance Association, which had testified that the law would reduce premiums by 25% to 30%, asked for a rate hike.[39]

Connecticut – In 1986, Connecticut enacted major “tort reforms.”  But by 1987, one state lawmaker was noting, “The insurance industry now says those measures will have no effect on insurance rates.  We have been disappointed by the response of the insurance industry.  The reforms we passed should have led to rate reductions because we made it more difficult to recover, or set limits on recovery.  But this hasn’t happened.”a href="#_ftn40);" name="_ftnref40" >[40]

Why have insurers routinely asked for premium hikes after they have been successful getting “tort reforms” passed, and why has there not been a backlash by legislators, medical lobbies and other policy holders?

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