Malpractice insurance rise of 41% is sought

Doctor-owned insurer seeks increase, though claims down from '03

August 19, 2004|By M. William Salganik | M. William Salganik,SUN STAFF

Dr. David Bianchi was paid $1,000 to remove infected tonsils a decade ago, but now insurers typically pay him $250 to $300 for the procedure.

Meanwhile, the four doctors in his Montgomery County ear-nose-throat surgery practice, as a group, may have to pay more than $160,000 next year in malpractice premiums if a 41 percent rate increase wins approval - more than double the $59,000 they paid as recently as 2002.

"I feel like I am collateral damage in a great war that is going on between trial lawyers and insurance companies," Bianchi said at a hearing yesterday in Baltimore on a proposed malpractice insurance rate increase.

The issue, doctors say, is driving some of them out of practice. It's also creating a dilemma for state politicians.

The hearing produced a mix of dry actuarial testimony and impassioned pleas from doctors who said they are squeezed between rising costs and flat or declining payments from insurers.

Among the technical experts, a consulting actuary hired by the Maryland Insurance Administration said he disagreed with some of the insurer's projections, and thought a 33 percent premium increase was justified.

Medical Mutual Liability Insurance Society of Maryland, a doctor-owned insurer which covers three-quarters of the private physicians in the state, defended its request for a 41 percent rate increase.

In fact, it told regulators, its actuaries believed that a rate increase of as much as 46 percent was justified by a trend of increased claims payouts.

A dozen doctors, including representatives of MedChi, the state medical society, didn't get into the technical debate on the size of the rate increase, but said the escalating liability premiums - Med Mutual got a 28 percent increase approved for the current year - threaten to drive more doctors out of business.

"How can you say a cost of $120,000 to $160,000 is not excessive?" asked Dr. Mark S. Seigel, president of MedChi. As an obstetrician in Montgomery County, he faces premiums in that range next year. "It's absurd," he said.

He said the medical society knew of at least 44 cases of physicians in various specialties who have closed their practice or stopped offering a key service such as obstetrics because of rising malpractice premiums.

Testifying in a lab coat, Dr. James Lacey, a family practitioner, said his county, Kent, had lost its only back surgeon and now had very few psychiatrists, mainly due to increasing insurance rates.

The doctors appealed for reform of the way the court system deals with malpractice cases and for a state subsidy for the next few years to keep malpractice rates at current levels. Such a subsidy would cost about $30 million, Dr. Seigel testified.

Efforts to reform the system have generated a political stalemate so far. Gov. Robert L. Ehrlich Jr. has been cool to a state subsidy, although the idea has some legislative backing. The Ehrlich administration backed a bill this year that would have reduced pay-outs in some cases, but the legislature killed it.

Those solutions, however, were beyond the scope of the hearing, at Maryland Insurance Administration offices in Baltimore, and the rate case of which the hearing is a part.

The insurance regulators are charged by law with determining whether Med Mutual's request is excessive or inadequate, based on projections of claims.

David L. Murray, chief executive officer of Med Mutual, testified that the insurer is paying more claims each year, and that the average claim payment, $410,546 for the first six months this year, is nearly double the average five years ago.

Although the amount paid in claims so far this year is down from last year, he said, that's not necessarily a predictor of what the full year's claims cost will be.

The state's consulting actuary, John Herzfeld, of Milliman Inc., said his statistical review didn't support Med Mutual's estimate of the rate at which the number of claims paid will increase, leading him to an "indication" of 33 percent.

Herzfeld said he didn't see justification for Med Mutual's plan to group dermatologists and psychiatrists into a risk group with primary care doctors rather than keep them in their own risk pool - a change that would double the rates for those two specialties.

"Obviously, we'll go back and review what he said," Med Mutual's Murray said after Herzfeld's testimony. Med Mutual has until next week to respond to Herzfeld's report.

Absent from the hearing was the Maryland Trial Lawyers Association, a group that opposes reforms of the malpractice system and has argued that Med Mutual's rate increases aren't justified.

Jay Angoff, a former Missouri insurance commissioner who is a consultant to the trial lawyers group, said yesterday the total paid in claims so far this year is less than last year, so "to ask for such an increase is an outrage."

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