Medical Malpractice Rates Fall

Medical malpractice rates are continuing a downward trend in Arkansas, according to an annual report presented by the Arkansas Insurance Department to the Senate and House Committees on Insurance and Commerce.

According to the report, submitted Aug. 15 by Bill Lacy, property and casualty division manager, only two of the 22 companies providing malpractice insurance in Arkansas filed for rate changes in the last 12 months, and both of those were decreases. Tennessee-based State Volunteer Mutual Insurance Company decreased rates by 5 percent effective June 13, while Louisiana Medical Mutual Insurance Company decreased its rates by 3.7 percent effective May 3. Both are physician-owned, and both insure physicians and surgeons.

Three other companies made initial filings. MAG Mutual Insurance Company, which insures physicians, filed on March 31. Liberty Insurance Underwriters, which insures dentists, filed on Feb. 21. National Union Fire Insurance Company of Pittsburgh, which provides professional liability insurance for physicians’ assistants, filed Jan. 5.

National Union also entered the market to insure neurologists on Nov. 16 of last year.

The report states that, in 2010, the pure loss ratio, or the comparison of losses to premiums, was 19.06 percent. Defense and cost containment expense (DCCE) – the cost of defending ratepayers against litigation – was 15.04 percent.

Those numbers are part of a positive trend. They were a little more than half of what they were in 2009, when the pure loss ratio was 35.66 percent and the DCCE ration was 24.07 percent. The numbers for 2008 were 44.6 percent and 22.1 percent, while in 2007 they were 42.99 and 33.42 percent, respectively.

“When you consider selling and operating expenses of the writing companies, the combined ratio for those active companies have likely fallen below 100%, rendering the market profitable for the first time in a decade,” the report states.

Prior to this year, rates were down a combined 1.3 percent since 2006 among companies that have made filings for increases or decreases. That followed a big run-up in rates in the first part of the 2000s, when the Insurance Department allowed companies to have double-digit increases for several straight years rather than the much larger increases some wanted. Some requested 100 percent increases.

Rates, which peaked nationwide in 2007-08, are down because claims are down – an estimated 25-30 percent from four or five years ago, according to Larry Smarr, president of the Physician Insurers Association of America.

And the number of lawsuits has decreased because the high cost of bringing suit has led plaintiffs’ attorneys to file only cases they believe they are likely to win.

“Bringing a medical malpractice lawsuit is expensive, and the plaintiffs’ bar doesn’t have the money to bring lawsuits any more than the other side has the money to defend them right now,” said Lars Powell, Ph.D., Whitbeck-Beyer chair of insurance and financial services at the University of Arkansas at Little Rock College of Business.

After the market-leading St. Paul Fire and Marine Insurance Company suddenly dropped malpractice insurance coverage in 2004, Arkansas briefly had no insurers in the state, but better economic conditions have led more companies to enter the market.

Steve Brawner is the author of this article. He can be reached by e-mail at [email protected].