The insurance execs representing the five remaining medical liability companies in the state testified before the Ohio Medical Malpractice Commission stating that the companies' declining investment returns have not played any part in the increasing rates. The execs stated that only small portions of their investments are in equity instruments.
In addition, the execs indicated that an increase in the frequency and severity of medical malpractice claims is primarily responsible for recent increases in liability insurance rates. The executives said the companies face difficult challenges in forecasting future claims and payments, noting that rates are set over a longer-term period, rather than other insurance industry sectors, which have rates based on two- to three-year periods.
The executive from OHIC Insurance Company said his company lost about $44 million between 1997 and 2000, when it collected $120 million in premiums and paid out $164 million in claims. He noted that OHIC rates for physicians in Cuyahoga County are 40% higher than in the rest of the state. That increase, he said, is attributed to the county's higher loss costs.
The president and CEO of American Physicians Assurance Corporation said his company had a "disastrous" entry into the Ohio market. He said that the company, which did not have significant experience in Ohio - established its initial rates based on the competitive market. Those rates turned out to be too low, which produced a $139 million loss between 1995 and 2003.
The senior counsel for The Doctors Company pointed to the MICRA law in California that has been credited with keeping that state's liability rates lower than in Ohio and elsewhere. He said that MICRA has helped stabilize the rates in California. MICRA includes among other provisions a $250,000 cap on non-economic damages; tiered limits on attorney fees; periodic payments for future payments and a requirement that plaintiffs provide a 90-day notice of an impending claim to allow for negotiations.
The executive from Medical Assurance stated that to his knowledge no medical malpractice insurer has made money in Ohio over the last five years. He said Medical Assurance believes that at this time its current rates are appropriate, but he noted that any action to reduce or freeze rates would impact the company's continued operations in the state. One of the executives noted that a cap on rates for a year would be "devastating" to his company.
The executives also testified that the medical liability insurance market in Ohio is beginning to stabilize, due in large part to rate increases and the state law limiting jury awards. All of the executives from the five companies told the Ohio Medical Malpractice Commission they are believe they will turn profits this year after five years of losses. Rate increases should moderate over time, but they will not decline any time soon. The executives stated that doctors are likely to face double-digit increases in premiums until the Ohio Supreme Court upholds the 2003 law capping awards for noneconomic damages.
The AMC/NOMA lobbyists and physician leadership were in attendance at the commission meeting to hear the testimony of the five insurance executives. A copy of their full testimony is available at the AMC/NOMA offices.