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Don Jacobs
Don Jacobs
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Medical Malpractice Insurance Rates Decline 12.5%

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A January 11, 2008 article in the Washington Insurance Journal contained some interesting news. Malpractice rates for doctors have now fallen by 12.5 percent in 2007, followed by a record setting year of profits for Washington’s largest Malpractice Insurance Company, as reported by the Washington State Insurance Commissioner’s Office. Although some rates will remain stable, the article stated the reduction will result in savings of up to 20% for physicians with good claims experience. This is a trend nationwide. Insurers in many states claim the reductions are due to “Tort Reform” laws they’ve passed limiting consumer’s right to sue for medical error. But Washington voters rejected similar laws in the 2005 election. Many will recall the TV ads threatening voters with doctors leaving the state and people losing access to health care because of high malpractice rates. Voters were told the high rates were due to all the lawsuits doctors had to contend with. So what happened? Did the state see a significant reduction in lawsuits? Not according to the state courts. Although malpractice lawsuits have slowly been decreasing for years, the last few years didn’t show any significant reduction in the numbers. And the amount paid out in claims has been fairly stable for years as well. So what is one to make of this news? Was the medical industry, (I use the word industry because many forget this is a for profit enterprise), trying to sell us a bill of goods with their TV ads urging voters to pass tort reform laws in 2005? It sure looks that way. It also shows that insurance premiums had nothing to do with any increase in the number of lawsuits or size of any payouts. This is confirmation of what many lawyers and consumer insurance experts were saying all along, the increase in rates had nothing to do with the court system. Instead they were driven by poor investment yields the insurance carriers were making with their reserves in the stock and bond market. A cycle that is repeated every few years in the insurance industry whenever financial markets rise and fall. To quote our state’s Insurance Commissioner Mike Kreidler, “This shows that premiums can be contained without sacrificing the rights of patients”. Unfortunately, you can bet the next cycle involving an increase in rates will again bring howls from the medical and insurance community that it’s all due to lawsuits. Hopefully people will remember this article then.