Medical Professional Liability and the Delivery of Obstetrical Care Volume I (1989) / Chapter Skim
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6 Obstetrical Malpractice Insurance
6 Obstetrical Malpractice Insurance
Pages 92-124
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From page 92... ...
Has its affordability changed over time? What are the trends in severity and frequency of medical malpractice claims and how do they affect the market in medical malpractice insurance?
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From page 93... ...
THE STRUCTURE OF THE MARKET Nearly all health care providers purchase professional liability insurance to protect themselves financially from malpractice claims. Under the terms of a typical malpractice insurance contract, the insurance company agrees to accept financial responsibility for payment of any claims up to a specific level of coverage during a fixed period, in return for a fee.
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From page 95... ...
Premiums for physician malpractice insurance are typically based on the claims rate for other physicians in the same geographic area, sometimes modified by the claims experience of the individual physician. In some instances premium rates are uniform throughout a state; in others rates differ among territories within a state.
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From page 96... ...
It has also been alleged in the press that the withdrawal of commercial insurers from offering malpractice coverage in many states during this period was orchestrated in part by the major reinsurance companies, which were frustrated in their attempts to impose claims-made policies and rate increases. A similar allegation claiming that such a conspiracy among insurers affected liability insurance for governmental entities is currently the subject of an antitrust suit brought by the attorneys general of several states fIn Re Insurance Antitrust Litigation, C-88-1688-WVVS (N.D.
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From page 97... ...
Between 1982 and 1986, mean professional liability premiums of selfemployed obstetrician-gynecologists increased by 171 percent, while the Consumer Price Index and the medical care component of the Consumer
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From page 98... ...
1988. The malpractice insurance system and obstetrical care: Recent experience and options for change.
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From page 99... ...
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From page 100... ...
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From page 101... ...
The Colorado insurance department had previously approved the classification of family physicians practicing obstetrics as obstetrician-gynecologists by the Doctors' Company of California, which had justified the classification using California data. The committee noted that there has been little systematic analysis of insurance company underwriting practices with regard to family physicians or the risk experience of family physicians (Needieman and Hackbarth, 19881.
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From page 103... ...
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From page 104... ...
Because claims data have not been readily available for systematic analysis or public discussion, it is difficult to assess these contentions. Historically, physician groups have sought to discourage the affiliation of obstetrician-gynecologists and CNMs, both through restrictions on hospital privileges and access to malpractice insurance (Lazarus et al., 19811.
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From page 105... ...
Premiums as a Percentage of Gross Income To further evaluate the issue of whether medical malpractice premiums are burdening obstetrical providers, the committee examined the data documenting the relationship of premiums to the gross income and professional expenses of obstetrical providers. The AMA data indicate that between 1982 and 1986 liability expenses rose from 4.9 to 10.3 percent of gross income for obstetrician-gynecologists, more than for any other specialty group analyzed (see Tables 6.5 and 6.61.
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From page 106... ...
, compared with approximately 10 percent for obstetrician-gynecolog~sts, 7 percent for surgeons, and 3 to 4 percent for family and general practitioners, internists, and pediatricians (see Table 6.51. Premiums as a Percentage of Professional Expenses The committee also examined data documenting the relationship of professional liability premiums to the other professional expenses of obstetrical providers (see Table 6.61.
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From page 107... ...
In spite ofthe 171 percent rise in premium costs between 1982 and 1986 the average net income of obstetrician-gynecologists grew by 21 percent during this period. Because average professional expenses of obstetrician-gynecologists rose 38 percent during this period, the committee hypothesized that self ~ ~ ~ r-~ DAM ~ of 7 ~ TABLE 6.5 Mean Liability Premiums as Percent of Mean Gross Income of Self-Employed Physicians 1982 1983 1984 1985 1986 Increase, Specialty Thousands of Dollars 1982-1984 Obstetrics-gynecology Premium Gross income Percent of gross Family, general practice Premium Gross income Percent of gross Internal medicine Premium Gross income Percent of gross Surgery Premium Gross income Percent of gross Pediatrics Premium ~ Gross income Percent of gross 10.814.0 220.6226.6 4~9~o6.2% 3.54.2 146.7146.3 2.3~o2.9~o 3.7 161.8 2.3% 9.9 232.3 4.3% 4.5 183.1 2.4 11.0 256.6 4.3 2.93.9 138.2134.9 2.1%2.9 19.023.5 240.0256.8 7.9%9.2% 4.6 160.8 2.9% 4.95.8 193.9192.0 2.5%3.0% 13.316.6 279.9290.7 4.8%5.7% 3.44.7 151.5163.5 2.2%2.9% 29.3 171% 285.4 29% 10.3% 6.87.3 108% 174.4200.2 36% 3.9%3.6% 7.1 219.9 3.2% 21.3 311.0 6.8% 92% 36% 115% 34% 6.3 117% 175.0 27% 3.6% SOURCE: Korenbrot, C
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From page 108... ...
To discover that, it would be necessary to compare the real net incomes of various types of obstetrical
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From page 109... ...
Accordingly, the committee could only conclude that the national aggregated data that are available do not suggest that rising premiums are depressing net income on a national basis. Rising Professional Liability Premiums Linked to Increases In Fees The evidence available to the committee suggests that fees for obstetrical services have increased in absolute terms and because of defensive 23.5 124.3 18.8 4.6 6.8 71.6 77.9 6.4% 8.7 5.8 102.0 5.7 Specialty Obstetrics-gynecology Premium Net income Percent of net income 1985 1986 Increase .
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From page 110... ...
Among those who had increased their fees, 34 percent said it was in response to professional liability insurance costs (Academic Task Force, 19871. In California 82 percent of obstetrician-gynecologists and 15.9 percent of family and general practitioners reported that they had increased their fees because of higher professional liability insurance costs (CMA, 19871.
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From page 111... ...
1988. Effects of professional medical liability premiums on obstetric providers and the practice of obstetrics.
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From page 112... ...
PROFITABILITY OF MEDICAL MALPRACTICE INSURANCE The pervasive phenomenon of rising medical malpractice premiums prompted the committee to question the business practices of medical malpractice insurers. In particular, because many have alleged that insurance practices are at the heart of the professional liability issue, the committee believed that it should question how profitable the medical malpractice business is and whether underwriters are reaping su
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From page 113... ...
It is aware that other studies of the insurance industry are in progress. The committee found little support in these studies for the proposition that excess profits on the part of insurers have been a major contributor to the increase in medical malpractice insurance costs in obstetrics.
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From page 114... ...
, Florida's Academic Task Force for Review ofthe Insurance and Tort Systems, and the Tort Policy Working Group, an interagency working group of the federal government and the New York State Department of Insurance (NeedIeman and Hackbarth, 19881.All these groups concluded that the rate of return earned by the medical malpractice insurance industry was comparable with or less than that of other industries competing for the same investment capital. The GAO study estimated the profitability of the property-casualty insurance industry, concentrating on the medical malpractice and general liability insurance lines for the period 1975 through 1985 (GAO, 19871.
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From page 115... ...
This return was slightly greater than the return in the property-casualty industry as a whole, but it still was well within the normal range for American corporations." The task force concluded that it must "reject the assertion that excess insurance company profits are a cause of the medical malpractice crisis. On the other hand, the liability insurance industry's financial condition is not nearly as serious as it sometimes claims....
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From page 116... ...
For example, the Harvard Risk Management Foundation, which provides services to 14 health care facilities and the thousands of physicians participating in the Harvard Medical Institutions insurance program, has been highly influential in the field of risk management. The foundation engages in a full range of risk management activities, including assisting its member institutions in analyses of loss and loss prevention protocols in an effort to improve risk management and quality assurance programs.
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From page 117... ...
In addition to the Harvard claims data, sources for the standards included ACOG's Standards for Obstetric-Gynecologic Services, the collective expertise of the Harvard medical community, existing departmental rules and regulations, and certain loss prevention or underwriting guidelines developed by other groups, such as the Insurance Requirements for Obstetrical Practice of the Utah Medical Insurance Association. Phase ~ Clinical Standards for the Obstetrical Services ofthe Harvard Medical Institutions were finalized by the obstetrical chiefs in August 1987.
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From page 118... ...
Paul and the Pennsylvania Medical Society Liability Insurance Company, publish monthly or bimonthly newsletters containing both general information and discussions of specific problems that have surfaced. Some insurers have developed home-study materials, including videotapes and free medical-legal correspondence courses.
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From page 119... ...
Some companies reported that plans including discounted premiums were rejected by state insurance commissioners. PROPOSALS TO ALTER THE MEDICAL MALPRACTICE INSURANCE SYSTEM A number of proposals have been advanced in the last decade to address the medical professional liability problem by altering the practices of medical malpractice insurers.
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From page 120... ...
Many states support patient compensation funds by surcharging medical malpractice insurance of physicians and hospitals. Because the funds have often operated in whole or in part on a cash flow basis rather than on a basis of funding future liabilities, this has allowed the combined premium and surcharge to be lower initially than an insurance
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From page 121... ...
This Excess Liability Insurance Pool program effectively shifts a significant portion of the burden of purchasing higher limits of malpractice insurance from the physician to the hospital and to those who purchase hospital services. The state had hoped to obtain federal participation in this program through Medicaid, but the Department of Health and Human Services ruled in 1987 that the program was not entitled to reimbursement under either Medicaid or Medicare.
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From page 122... ...
Currently, several insurers place surcharges on premiums for physicians with poor records, and the Florida Tort Reform and Insurance Act of 1986 requires that ratings reflect the number of surgeries and claims experience of individual physicians. Other insurers who have tried to implement experience rating report that it presents practical difficulties.
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From page 123... ...
1985. Professional Liability Insurance and Its Effects: Report of a Survey of ACOG'S Membership.
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From page 124... ...
Hackbarth.1988. The malpractice insurance system and obstetrical care: Recent experience and options for change.
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