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Doctors' insurance remedy?


When hundreds of doctors rallied in Annapolis last month against increases in malpractice insurance premiums that are forcing some of them to hang up their stethoscopes, they sought a tighter cap on malpractice damage awards.

But trial lawyers and, notably, Senate President Thomas V. Mike Miller are backing a different type of malpractice reform: "rate compression."

Although it sounds like something devised by a committee of wonky actuaries, the concept is simple: Cut the insurance costs for certain high-risk specialties such as obstetricians and neurosurgeons and make up the lost revenue by raising the rates for other doctors.

A drastic rise in malpractice rates has fueled debate nationally and in Maryland, where the largest insurer boosted malpractice premiums 28 percent this year. The rate-compression proposal is one of a number of approaches competing for support in Annapolis.

The Ehrlich administration, which has identified malpractice reform as a priority this year, is backing tighter limits on future payouts. Del. Joseph F. Vallerio Jr., chairman of the House Judiciary Committee, is pushing legislation that would require mediation in malpractice cases and thereby reduce litigation costs.

"We all agree there's a problem, but we don't all analyze the problem the same way, so solutions can differ," Sen. Delores Kelley said at a hearing on the issue yesterday before the Senate Finance Committee. She is sponsoring two bills that would change the way Medical Mutual Liability Insurance Society of Maryland figures investment income and surpluses into its rate-making. Medical Mutual is the doctor-owned company that covers the majority of physicians in Maryland.

The Miller bill would cap premiums for the highest-risk doctors at six times the rate of the lowest premium. Angoff said he was not aware of any other state that had taken such action to set the rates of private malpractice insurers, although Wisconsin uses a six-to-one ratio in a state-run fund to cover large verdicts.

Although not generally applied to malpractice rates, the idea of spreading high risks through larger insurance pools is not unusual, especially in situations where insurance is mandatory, either legally or practically, Tom Baker, director of the insurance law center at the University of Connecticut, said in an interview yesterday.

High-risk auto insurance pools for drivers with bad records and assigned risk pools for homeowners in high-crime areas are two examples of such approaches, Baker said.

Miller, testifying yesterday before the finance committee, said the bill could produce an "immediate and dramatic" drop in premiums for high-risk specialties, with obstetricians saving as much as $40,000 a year. His bill would help doctors "without doing damage to patients' rights" and without suppressing future malpractice awards.

The concept could work because "there are so few obstetricians and so many of the [lower premium group] doctors," said Jay Angoff, a consultant to the Maryland Trial Lawyers Association. Under projections by Angoff, the bill would add $2,875 a year to the premiums for pediatricians, psychiatrists, cardiologists, dermatologists and other lower-risk specialties.

But the lobbyist for the state medical society, Joseph A. Schwartz 3rd, complained that the bill would "have the practical effect of raising malpractice premiums for perhaps 90 percent of Maryland physicians." He called it "a trial lawyer bill" and "a diversion" from the real problem - the need to reform the malpractice system.

Even if the bill helps some doctors, it doesn't address the problems of nurses, hospitals, nursing homes and other health providers facing escalating malpractice rates, said Steven B. Larsen. The former Maryland insurance commissioner leads a group of health care providers who are pushing for broad malpractice reform.

Larsen testified that hospitals have seen a 50 percent increase in premiums in two years, and nursing homes have been hit with a 400 percent increase over the past four years. "This is not a doctor issue," Larsen said. "This is a systemic problem and the system is broken."

Angoff, who was state insurance commissioner in Missouri from 1993 to 1998, said he thought of the rate-compression concept after reviewing a successful filing for a 28 percent rate increase by Medical Mutual.

In other states, on average, obstetricians pay premiums at least six times as high as those charged to internal medicine doctors, Angoff said, citing figures from the trade newsletter Medical Liability Monitor.

Medical Mutual charges obstetricians 8.2 times as much - the ninth-highest ratio of 150 companies listed.

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