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Public officials and consumer groups are crying foul
after two major malpractice insurance carriers proposed
major rate hikes for 2004, even though their exposure
to damage claims has been drastically restricted under
the state's new tort reform measures.
The Joint Underwriting Association, an insurer of last
resort in Texas, filed for rate increases of 35 percent
for doctors and 68 percent for institutions with the
Texas Department of Insurance. Another insurer, GE Medical
Protective, which covers 11,500 health care providers
in Texas including 6,700 physicians, has filed for a
19 percent increase.
Although other medical liability insurers have cut
rates in the wake of new limits, the rise in some policy
rate proposals runs counter to claims by medical groups
and insurers that capping lawsuit damages would reduce
escalating policy rates that forced some providers to
abandon practice in Texas.
Last fall's Proposition 12 referendum approved by voters
limited noneconomic damages in malpractice lawsuits
to $250,000. The caps went into effect in late September.
The JUA proposal already has been rejected by Insurance
Commissioner José Montemayor, who said the filing
"flies in the face of sound data that demonstrate
future rates should be dropping as a result of passage
of Proposition 12."
"A rate proposal is a projection of future losses,"
he said, "And with JUA, there was no historical
model." The abundance of lawsuits filed before
Proposition 12 "was a one-time blip … that
should not be a part of the rate-setting process,"
he added.
Medical groups and insurers say the 2004 increases
cover the run on malpractice lawsuit filings made before
the damage caps' effective date in September, and are
not indicative of long-term changes that already are
helping to recruit high-risk specialists back into the
state.
"We felt that Proposition 12 was necessary, but
also knew it wasn't going to be a quick fix," said
Joyce Engler, a spokeswoman for the Texas Hospital Association.
"We're just going to have to be patient. Texas
is still a volatile market and the huge volume of lawsuits
filed before Proposition 12 made insurers less confident,
and right now they're not willing to go out on a limb
and reduce rates."
But opponents of Proposition 12 and state insurance
regulators question whether insurers are fully vetting
risk reduction in the new limits.
Jim Hurley, public information officer with TDI, said
the agency "was a little surprised at some of the
[rate] filings and we feel that some of the companies
did not take into full account the impact that Proposition
12 would have on future losses."
"We'll have to examine every rate [proposal] and
also rates that are currently in use," Hurley said.
Tom Smith, director of the Texas office of Public Citizen,
a consumer advocacy group, said JUA and other insurers
promised that they would reduce rates if Proposition
12 passed, "which just goes to show that promises
made to the Legislature by insurers are often broken.
And [rate hikes] also go to show that Texans were misled
by those who promised to lower malpractice rates."
JUA must refile a new rate or seek an administrative
hearing to defend its proposal.
The nonprofit JUA, officially known as the Texas Medical
Liability Insurance Underwriting Association, referred
calls to its legal counsel, who could not be reached
for comment to explain the hike proposal.
JUA, which covers 2,500 physicians, 29 hospitals and
50 nursing homes in Texas, was created by the Texas
Legislature in 1975 to provide liability insurance to
doctors or institutions that have been denied coverage
elsewhere or can't find more affordable rates.
A GE Medical Protective spokesman defended the company's
19 percent increase proposal (effective June 1, if approved),
noting the increase would have been 25.5 percent without
Proposition 12's protections. "We were able to
ask for less," John Novaria said.
The company's rate requests are based on scrupulous
risk analysis, he said. "Over the years, we have
seen a number of carriers come and go pretty quickly
in a stressed market. They undercut on price but can't
afford to pay the claims. That's why we have to be absolutely
right [in rate requests] down the road, and why we are
so selective about the physicians we write."
GE increased its rates by 35 percent in June, Novaria
said.
Other medical liability insurers have frozen or cut
rates in wake of the new limits.
The Doctors Co. maintained its malpractice rates after
the Proposition 12 vote, and the physician-run Texas
Medical Liability Trust announced it was lowering rates
12 percent in the wake of the proposition's passage,
after a four-year period in which the trust raised rates
128 percent, according to TDI.
JUA's premiums, by comparison, have risen just 3 percent
since 1999.
Another insurer, American Physicians Insurance Exchange,
will offer a regulated malpractice product in Texas
in 2004 that it hasn't offered in a decade, charging
16 percent more than it did in 1994, according to the
insurance department.
Although overall liability rates are edging up, "it's
at a much slower pace than in the past two years when
rates shot up as much as 200 percent," said Charles
Bailey, president of the Texas Medical Association,
which supported the lawsuit changes.
In the three months before Sept. 1, when the new legislation
took effect, more than 1,700 medical lawsuits were filed
in Texas, or about a 300 percent increase over the same
three months in 2002, the American Medical Association
said. "Insurers have to take those numbers into
consideration as those lawsuits wind their way through
the system," Bailey said.
The Texas Nurses Association, which favored Proposition
12, has said nurses were forced to engage more in defensive
health care in the pre-Proposition 12 system. The litigation
climate also discouraged job candidates from entering
the profession, where RN vacancy rates average 12 percent,
the TNA said.
TNA officials said the organization has yet to feel
a ripple from any of the proposed malpractice rates.
TMA spokeswoman Pam Baggett said Proposition 12's passage
already is helping recruitment of doctors from out of
state. "And it will help keep that cardiologist
in Harlingen or that neurosurgeon in Beaumont,"
she said. "It will also reverse the trend of more
and more doctors not taking emergency room calls. The
real winners are patients."
Contact Steve McLinden at smscribe@hotmail.com
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