Malpractice liability limits did not hold down doctors' malpractice premiums in California

Insurance Reform, Not Liability Limits, Lowered Doctors' Malpractice Insurance Premiums in California, the Model for House Bill

Insurance reform, not malpractice liability limits, held down doctors' malpractice premiums in California said Consumer Watchdog today before a Congressional hearing on H.R. 5, a bill modeled on California law that would take away the rights of patients injured by medical negligence. Limits on patient rights failed to lower physicians' malpractice premiums, and therefore health costs, in California.

Medical malpractice insurance premiums increased 450% in California in the thirteen years after liability limits were enacted. However, in the first three years after insurance rate regulation was approved, malpractice premiums fell 20% and then stabilized even as premiums across the country continued to fluctuate.

These savings are illustrated in a premium analysis conducted by the Sacramento Bee: http://www.consumerwatchdog.org/images/sacbee_mm_chart.gif

"Preventing patients from holding negligent doctors accountable did not lower health care costs in California. When the state passed liability limits like the House Republicans' proposal, doctors' malpractice insurance premiums rose 450% to a record high. Only insurance rate regulation held skyrocketing malpractice premiums in check," said Carmen Balber, Washington director for Consumer Watchdog.

California's law contains most of the limits proposed in H.R. 5, including a $250,000 cap on non-economic damages. The cap takes the worst toll in the most catastrophic cases in which medical negligence causes severe injury or death.

According to a study by the RAND Institute, in more than half of the cases in which a California jury finds a medical provider to have killed a patient due to error or other avoidable malpractice, the cap causes the appropriate compensation found by a jury to be cut at least in half.

The study also found that in cases in which the jury determined that there was malpractice:

- Compensation to malpractice victims who sustained brain damage was limited in 65% of cases;

- 67% of verdicts in cases involving seniors were capped; and,

- Verdicts to compensate female patients were reduced by approximately one third more than verdicts in favor of male victims.

California voters enacted the insurance reform initiative Proposition 103 at the ballot in 1988. It required a 20% rollback in premiums for companies including medical malpractice insurers, and subjected insurance rates to "prior approval" regulation that requires insurance companies to open their books and get approval for any rate change before it takes effect.

Property-casualty insurance companies in California eventually issued over $1.4 billion in refund checks under this provision, and medical malpractice insurance companies were the first in the state to voluntarily comply. The state's top three medical malpractice insurance companies paid more than $60 million in refunds.

Proposition 103 also allows any member of the public to intervene and challenge excessive rate increases. Consumer Watchdog used this intervenor process to prevent $66 million in unjustified rate hikes for doctors and other medical professionals from 2002 to 2005.

Download the letter Consumer Watchdog sent to committee Chairman Upton and Ranking Member Waxman to set the record straight on California's experience: http://www.consumerwatchdog.org/resources/ecprop103.pdf

Download a report on the impact of insurance regulation and liability limits in California:

For more information on insurance rate regulation and medical liability limits in California, visit Consumer Watchdog's medical malpractice resource page: http://www.consumerwatchdog.org/focusarea/medical-malpractice

Download the RAND study: http://www.consumerwatchdog.org/resources/rand_mg234.pdf