States call for liability reform as premiums increase beyond affordability

Physicians are losing coverage and facing increasing insurance rates. Reform proceeds state by state, with federal action still to come.

Skyrocketing rates for malpractice insurance have pushed liability reform into the public consciousness lately. The local news carries stories of physicians retiring early, quitting or moving their practices because of high insurance rates in some states. Work stoppages, especially in emergency medicine, have made national news. Fingers are pointing in all directions, as physicians blame profiteering insurers and the insurers in turn blame increasingly high jury awards.

As a result, liability reform has gained increasing attention, with many states enacting or considering reforms and the federal government considering nationwide action.

The specialties most seriously affected have been obstetrics, neurosurgery, orthopedic surgery and emergency medicine. Ophthalmology as a specialty has not been hit as hard, but individual practitioners have still experienced significant increases in premiums. Continuation of this trend may put a strain on the specialty.

The American Medical Association (AMA) as made liability reform a priority in its advocacy agenda. In early March, The AMA held a National Advocacy Conference in which President George W. Bush participated. The president expressed his support for physicians at the event. He urged them to contact their senators to make their views known about the issue.

Whatever the reason for the current crisis — high jury awards, a slow economy, or some combination of factors — physicians say they are hurting because if they cannot afford insurance, they cannot afford to practice.

Federal reform efforts

In March, the House of Representatives passed legislation that imposes a $250,000 cap on jury awards in cases of medical malpractice. House Republicans pushed the bill through in response to physicians’ complaints about soaring insurance costs, according to news reports. The bill does not place limits on compensation for medical bills, funeral expenses and other economic damages.

“The legislation passed by Congress today is based on a proven reform system in place in California since 1975,” said Yank Coble Jr., MD, president of the AMA, which has been a leader in advocacy efforts for liability reform at the federal level. “Capping noneconomic damages at $250,000 will help curb the jackpot lottery mentality that is jeopardizing patient care in the industry.”

Dr. Coble noted that medical insurance premiums in California have increased only 167% since 1975, whereas they have increased 505% in the rest of the country.

The House bill, HR 5, is known as the Help, Efficient, Accessible, Low Cost, Timely Healthcare Act, or the HEALTH Act.

The HEALTH Act encompasses all parties sued in a malpractice suit, said Nancey McCann, director of government relations for the American Society of Cataract and Refractive Surgery. It caps noneconomic, or punitive, damages two times the economic damages or $250,000, whichever is greater, said Steve Miller, Director of OphthPAC and of political affairs for the American Academy of Ophthalmology.

ASCRS and the AAO have united their lobbying efforts on liability reform with the Alliance of Specialty Medicine and the AMA.

California MICRA laws: Model reform Replication of California’s successful Medical Injury Compensation Reform Act (MICRA) is being advocated both at the state and federal levels. The state enacted this liability reform law in the mid 1970s, when an earlier liability coverage crisis occurred, said Steve Thompson, vice president of government affairs for the California Medical Association. Since then, the number of lawsuits in the state has remained stable, and the growth in award amounts has been slightly higher than growth in the standard of living, indicating that patients are not disadvantaged by the award cap, he said. The MICRA law does four basic things: provides a $250,000 cap on noneconomic damages; limits the percentage of attorney fees from an award; provides for periodic payments over time; provides for joint and several liability, to ensure appropriate percentages are awarded, Mr. Thompson said. “Since 2000, the trial lawyers have advocated two bills primarily to try to increase the cap. The cap is 80% of the law, so if you overturn the cap, you basically overturn the law,” he said. Sen. Dianne Feinstein (D-Calif.) is advocating adoption of a similar law at the federal level, Mr. Thompson said.

The HEALTH Act includes a “fair share” rule, which allocates damages in proportion to the parties at fault, he said. The bill has a statute of limitation of 3 years and allows states flexibility in enacting their own reforms, he said.

Reforms are expected to have a harder time passing in the Senate. Ms. McCann said lobbyists face a challenge to acquire the 60 votes necessary to pass such legislation in the Senate. Rewriting the legislation may be necessary to gain Senate approval, she said. Some senators want to see language making an exception for egregious cases.

Last year, the House passed the HEALTH Act, but it was killed in the Senate. It faces similar opposition this year.

Root of the problem

The Alliance of Specialty Medicine cites high, arbitrary jury awards as the cause of skyrocketing liability insurance premiums. The ASM claims that malpractice litigation is out of control and has started a domino effect in the healthcare system and insurance industry. Fear of lawsuits has led many physicians to practice defensive medicine by referring patients to other areas, or simply to stop practicing medicine.

In February, the ASM submitted testimony to the Senate Judiciary Committee and the Health, Education, Labor and Pensions Committee, in which they blamed burgeoning jury awards for disrupting the medical insurance market, not only causing companies to increase their premiums but causing some to declare bankruptcy or cease to write and renew policies.

“It is clear that the increasing number of multimillion dollar awards is driving up the costs of medical liability insurance. … This trend is not sustainable and … is forcing insurance companies, which must set their rates based on anticipated future losses, to steeply increase doctors’ medical liability premiums to ensure adequate reserves to pay future judgments,” the alliance said in its Senate testimony.

From the President to the general public, there is growing support for physicians, but legislative action varies from state to state.

The AMA has been tracking the liability issue nationwide and has declared 16 states in crisis: Pennsylvania, New Jersey, West Virginia, Florida, Mississippi, Texas, Ohio, Kentucky, Illinois, North Carolina, Georgia, New York, Arkansas, Nevada, Oregon and Washington. Ocular Surgery News spoke to physicians in seven of the crisis states.

New Jersey: The blame game

In New Jersey, the blame game is delaying reform, said Don Cinotti, MD, legislative chairman for the New Jersey Academy of Ophthalmology.

According to Dr. Cinotti, the closure of two of the largest insurance carriers in the area instigated the current crisis in his state. Physicians were sent scrambling for coverage, causing some to stop performing certain procedures. Feeling frustrated with the state legislature, physicians staged a work stoppage in early February to call attention to the issue.

When the MIIX insurance company consolidated into MIIX Advantage, it stopped writing new policies, Dr. Cinotti said. The consolidated company increased premiums on policies that already had high premiums. Some specialties saw a 200% to 300% increase in their premiums, when physicians were already paying $30,000 to $90,000 per year, he said.

“[The specialties affected] asked organizations such as the Medical Society of New Jersey to request reform from the governor and legislature,” Dr. Cinotti said. “What happened was that the state legislature tried to put the blame on someone rather than fix the problem, and the trial attorneys put the blame on anybody but them.

“Everything comes down to economics. Of the cases that go to trial, 80% are won by the doctors. If you’re the plaintiff’s attorney, you’ve got to make your money on 10% of the cases,” he said.

Advocacy groups were told that the insurance companies were trying to compensate for revenue loss from the events of September 11, 2001, and the stock market decline, he said.

In ophthalmology, pediatric patients are having difficulty attaining access to care in New Jersey, said Rudolph Wagner, MD, a pediatric ophthalmologist in Newark. In North Jersey, a number of retinal specialists no longer perform treatment for retinopathy of prematurity in premature babies, referring them to the Medical College of New Jersey, which has agreed to treat them, he said.

“They should be able to get the care in their own hospital and not be transported, which is more of an expense. It’s just an example of how the malpractice issue is affecting our ability to manage these kids,” Dr. Wagner said.

In early February, New Jersey physicians staged a walkout and protested in front of the state capital in Trenton and in front of the governor’s mansion. For 2 days, only emergencies were treated while physicians protested for relief, demonstrating the effects of a state medical emergency.

Pennsylvania: Stricter reforms

Availability and affordability of liability insurance is critical in Pennsylvania, said Chuck Moran, director of media relations for the Pennsylvania Medical Society. Not only have premiums increased, but several carriers have left the state.

Commonwealth law now requires physicians to carry $1 million in liability insurance. Currently, $500,000 of that amount is being covered by a state emergency fund.

“Doctors here are in between a rock and a hard spot. They’re seeing their rates increase with no relief in sight, if they can find the insurance,” Mr. Moran said.

After physicians threatened a boycott in late December, Governor Ed Rendell proposed the $220 million emergency fund to reduce rates. His plan is said to reduce physician payments by two-thirds by having insurers pay into the fund.

Last year, Pennsylvania legislators passed Act 13, which brought stricter tort reform and established a patient safety initiative. Patient safety officers are now in all hospitals, Mr. Moran said. The state board of medicine now disciplines physicians after a single act of negligence, and there is a mandatory reporting structure, he said.

The act includes language to reduce frivolous lawsuits and a venue rule that will keep malpractice trials in the county where the incident allegedly took place.

“All of this is decent for Pennsylvania because we’ve never had any reforms passed,” Mr. Moran said. “The venue rule was important because research showed lawyers were trying to pull cases into Philadelphia, which is known for high jury awards.”

The reforms only averted the crisis temporarily, and physicians are still leaving the state or retiring early, said Jeffrey Chaby, DO, a member of the Pennsylvania Medical Society who is active in tort reform efforts. He said the state fund is problematic because there is no underwriting. Even with the fund, premiums are unaffordable for many physicians, he said.

“There are physicians unable to pay their liability insurance; they get a letter from their license board saying they didn’t comply and that their license is revoked,” Dr. Chaby said.

The state emergency fund, which is to be phased out, will leave an unfunded liability, he said. The portion paid by the fund for current judgments will not be given until the end of the year. The physicians will then replenish the award amount next year. Current cases are estimated to be in excess of $2.4 billion, he said.

“When you think about $2.4 billion, it’s going to take a lot of people, so we are all slowly going out of business,” Dr. Chaby said.

One large award in the state for a pediatric ophthalmology case will further drive up premiums in addition to the state fund, he said. He is pessimistic about reforms in Pennsylvania.

“Here in Pennsylvania we are a commonwealth, not a state. We have a constitution that prohibits caps. What physicians here are hoping is that the federal act to cap noneconomic damages will supersede the constitution, and that’s up for question,” Dr. Chaby said.

Florida: Patient safety initiative

Florida physicians suffer the same problems of affordability and accessibility. Last year, FPIC, Florida’s biggest insurer, left the state, creating more coverage difficulties for physicians.

In response to the crisis, a task force was established by the state to propose solutions. Among its proposals is a $250,000 cap on noneconomic damages, following California’s MICRA. The task force also recommended a patient safety initiative, as in Pennsylvania.

Patient safety would be enforced by the Patient Safety Authority, a public-private, nonprofit entity. It would require mandatory reporting of medical errors and voluntary reporting of near misses.

Other task force recommendations include insurance discounts for hospitals and healthcare facilitates with certified patient safety programs and requiring medical schools, nursing schools and allied health schools to implement courses on patient safety.

For tort reform, the task force recommended appointing judges with expertise in the medical profession to preside over malpractice suits. It also suggested having medical experts with expertise in the defendant’s specialty to screening potential suits. Stronger peer review of potential suits is a protection against meritless claims, the task force said. It also recommended sovereign immunity for emergency and trauma centers.

Francie Prendl, director of governmental affairs for the Florida Society of Ophthalmology, said the increased expense and reduced availability of insurance coverage has affected all specialties in Florida, although obstetrics, neurosurgery and emergency medicine are the most problematic.

“Some of the biggest increases this year were in pulmonology and cardiology. Those aren’t ones you normally hear about,” she said.

Nevada: Defensive medicine

Last spring in Nevada, a liability crisis was declared by the state. A medical liability association was established to cover physicians unable to obtain affordable insurance, said Lawrence Matheis, executive director of the Nevada State Medical Association. The crisis has been most critical in the Las Vegas area, he said.

“The crisis really started when St. Paul (The St. Paul Companies, a large insurer) left the market in December 2001, and it built when two other companies left. … We had the only trauma center in Las Vegas close for 10 days because the orthopedic surgeons were unable to obtain coverage, and we may see repeats of that as each specialty group is up for renewals,” Mr. Matheis said.

A special state legislative session held last summer produced a bill that established award caps, but two exceptions in the bill have been called not specific enough by insurance companies, he said. One exception allows the courts to abolish the cap if there are clear and compelling factors. Because of the possibility of court abuse, insurance companies have stated that they want the exception clarified, he said.

Rudy R. Manthei, DO, leader of the Coalition of Doctors in Nevada (CODIN), said his group advocates adopting liability reforms similar to California’s MICRA law.

“We got 96,000 signatures in 4 weeks to petitions for the five principles of MICRA, which is basically limiting attorney’s contingency fees so that injured plaintiffs get a larger percentage of the award as it grows,” Dr. Manthei said.

High awards have led not only to high premiums, but to physicians referring more patients out of state when in the past they would have treated them, Dr. Manthei said. In addition, national ophthalmic insurers such as the Ophthalmic Mutual Insurance Company (OMIC) are making finding coverage difficult for some physicians in high risk areas, he said. (See related article, April 15 print issue, page 11.) An ophthalmology malpractice case in Nevada was settled for $2.2 million in 2001, he said.

“The concern is that when you go over policy limits, you are personally responsible for that, which can cause us to file for bankruptcy. That has led us to practice defensive medicine, as well as to settle claims where we don’t feel we’ve done anything wrong. That also falls back to the increasing cost of health care,” Dr. Manthei said.

Mississippi

Like Nevada, Mississippi convened a special legislative session to deal with liability reform, said Fred McMillan, former president of the Mississippi State Medical Association and a practicing ophthalmologist. As in many states, the breaking point on the liability issue came when several large carriers left the state or stopped writing medical liability insurance.

The Mississippi Medical Insurance Company (MMIC) was formed by the state medical association because so many physicians could not obtain coverage, Dr. McMillan said. The current legislative session will determine if a pool will be established for physicians unable to obtain coverage otherwise, he said, although there is little possibility the pool can cover all physicians ineligible for coverage.

“[The MMIC has] been highly successful, but they can’t insure every physician in the state. The premiums have increased significantly because of the increased number of cases, and the increase in the level of judgments given,” Dr. McMillan said.

As a result of the difficulties in obtaining coverage and the increased premiums, physicians in Mississippi, as elsewhere, are referring patients to clinics in other parts of the state.

Ophthalmologists in Mississippi have seen their premiums rise by 45%, Dr. McMillan said.

“I have friends call me about what they should do. Right now, I don’t know where they stand,” he said.

Texas

Although he acknowledges he is not an expert in economics, John Shore, MD, said he believes the economy is the underlying reason for the liability crisis. Dr. Shore is a member of the Texas Medical Association and an ophthalmologist on the OMIC’s risk management and underwriting committees.

A strong economy in the 1990s led insurance companies to expand their numbers of policies and fight for increased market share, Dr. Shore said. But when the economy began to decline, many companies closed or froze on new polices, he said. Physicians whose insurance has been dropped are now having difficulty obtaining new coverage because of it.

“When St. Paul pulled out of the market, nationwide there was $1 billion in business on the table for insurance companies to absorb fairly quickly,” Dr. Shore said. “They were the biggest malpractice insurer in the nation. They were in all states, and heavily represented in some.”

Increased jury awards have also made insurance premiums rise, he said, and have limited the number of new polices a company can insure. He suspects some lawsuits are being rushed to filing now, before stricter liability reform can affect their outcome.

“You are seeing some multimillion dollar awards on cases that probably shouldn’t have come up for some time or never should have come forward. It’s almost like a system out of control,” he said.

West Virginia

At the beginning of 2003, surgeons in the northern panhandle of West Virginia took a leave of absence, leaving emergency units to handle patients. In response to this work action, by the end of the month, legislators had crafted relief from noneconomic caps, said Nancy Tonkin, executive director of the West Virginia Academy of Ophthalmology.

A coalition of defense lawyers, called the West Virginia Care Coalition, lobbied for award caps and collateral source language, she said.

For Your Information:

• Nancey McCann, director of government relations for ASCRS, can be reached at 4000 Legato Road, Suite 850, Fairfax, VA 22033; (703) 591-2220; fax: (703) 591-0614.
• Steve Miller, director of OphthPAC and of politicial affaris for the AAO, can be reached at 1101 Vermont Ave. NW, Suite 700, Washington, DC 20005-3570; (202) 737-6662; fax: (202) 737-7061.
• Don Cinotti, MD, legislative chairman for the New Jersey Academy of Ophthalmology, can be reached at 600 Pavonia Ave., 6th Floor, Jersey City, NJ 07306; (201) 963-5846; fax: (201) 963-8823; e-mail: floor6@aol.com.
• Rudolph Wagner, MD, can be reached at Children’s Eye Care Center of New Jersey, 495 N. 13th St., Newark, NJ 07107; (973) 485-3186; e-mail: wagdoc@comcast.net.
• Chuck Moran, director of media relations at the Pennsylvania Medical Society, can be reached at 777 East Park Drive, P.O. Box 8820, Harrisburg, PA 17105-8820; (717) 558-7820; fax: (717) 558-7840; Web site: www.pamedsoc.org.
• Jeffrey Chaby, DO, can be reached at 200 Butler Ave., Lancaster, PA 17601; (717) 393-0200; fax: (717) 393-7071.
• Francie Prendl, director of government affairs for the Florida Society of Ophthalmology, can be reached at 8833 Perimeter Park Blvd., Suite 301, Jacksonville, FL 32216; (850) 224-6496; fax: (850) 222-8827.
• Lawrence Matheis, executive director of the Nevada State Medical Association, can be reached at 3660 Baker Ln. #101, Reno, NV 89509; (775) 825-6788; fax: (775) 825-3202; e-mail: lmatheis@nsmadocs.org; Web site: www.nsmadocs.org.
• Rudy Manthei, DO, can be reached at 2598 Windmill Parkway., Henderson, NV 89014-5357; (702) 456-8389; fax: (702) 492-6976.
• Fred McMillan, MD, can be reached at 1421 N. State St. #503; Jackson, MS 39202; (601) 948-6886; fax: (601) 948-7044.
• John Shore, MD, can be reached at the Texas Oculoplastic Consultants, 3705 Med Parkway. Suite 120, Austin, TX 78705; (512) 458-2141; fax: (512) 458-4824; e-mail: jshore@tocaustin.com.
• Nancy Tonkin, executive director of the West Virginia Academy of Ophthalmology, can be reached at 2110 Kanawha Blvd. E, Suite 220, Charleston, WV 25311; (304) 343-5842; fax: (304) 344-4139; e-mail: nancy.tonkin@wvtmg.com.
• Steve Thompson, vice president of government affairs for the California Medical Association, can be reached at 1201 J St., Suite 200, Sacramento, CA 95814; (916) 444-5532; fax: (916) 444-5689.