California Medical Malpractice Insurance
The History of Medical Malpractice Insurance in California
In the early 1970s, the state of California faced a medical malpractice insurance crisis. An excerpt from the San Jose Mercury News in February of 1975 highlighted the severity of the crisis: "Premiums have reached the point that some physicians are leaving California or retiring from active practice and some other physicians in high-risk categories are unable to obtain malpractice insurance." Insurance premiums escalated as much as 300% as a result of large jury award and the high frequency and severity of med-mal claims at the time. The higher risk specialties included OB/GYNs, Neurosurgeons, Vascular Surgeons, and General Surgeons, but finding affordable medical liability coverage made it a very difficult time to practice any kind of medicine in California. Many doctors were forced to shut their doors. Eventually, the governor of California ended up having to call a special session to address what was labeled a medical “malpractice crisis.” The result of this session was the enactment of the Medical Injury Compensation Reform Act of 1976 or MICRA.
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Statistics for California Health Care Providers & Physician Insurance
Obtained from the California Department of Insurance, 2012.
- Licensed Physicians: 96,579
- Total Written Premiums in California: $505,680,260*
- Total Amount of Incurred Losses: $194,917,110
- Loss Ratio: 38.17%
- Number of companies: 44
*Data as of 2012
The Medical Injury Compensation Reform Act places limitations on trial awards and plaintiffs' attorney fees for medical malpractice cases in California. Primarily, MICRA limits compensation for non-economic damages such as emotional or mental distress, pain, or suffering, to no more than $250,000. Additional stipulations of MICRA and legislation that has passed since include the following:
- Patients are required to give a 90 day advanced notice of intention to file a claim.
- $50,000 may be paid in periodic increments, based on a sliding scale system.
- Collateral sources are allowable to potentially minimize the amount of recoverable damages and to prevent double recovery.
- Binding arbitration is allowable for healthcare providers.
- Statute of limitations on claims requires that any claim be made within one year of Economic damages/contingency fees and future damages over.
Exceptions to the statute of limitations:
- For cases involving children under the age of six, claims must be filed within three years of the injury's occurrence or before the child's eighth birthday, whichever time period is greater.
- For cases in which a county or local administrative agency owns and operates the hospital, claims must be filed within six months of the incident.
Aftermath of MICRA in California
MICRA was successful in regulating and stabilizing the medical malpractice marketplace, benefitting patients and doctors alike. The decade following the enactment of MICRA was both profitable for liability insurance companies and a time of declining premium costs for doctors, causing California to become a model for tort reform in other states. In the early 2000s loss ratios and premiums began to increase again, forcing 1/3 of the insurance companies that wrote policies in California to leave the marketplace.
This change in the market was traceable to several factors. First, a very small number of companies were writing policies. According to a report outlined by Dr. Dryoho, an acclaimed cosmetic surgeon from LA, the five largest carriers represented 71% of all practicing doctors in California. Secondly, jury verdicts continued to award increasingly large compensation for damages, despite the existence of MICRA. And third, the Cosmetic and Outpatient Surgery Patient Protection Act of 1999 made obtaining and maintaining insurance mandatory for almost all surgeons. Failure to maintain insurance coverage of $1-3 million could result in termination of a doctor's medical license. All of these factors—economic, judicial, and legal, were working in tandem and causing the price of malpractice insurance to rise.
California Medical Malpractice Insurance Market Today
Despite past fluctuations in the market, the California medical malpractice insurance market has become one of the most stable markets in the country. In July of 2011, seven of the carriers that make up the majority of the California medical malpractice insurance market filed for rate decreases ranging from 1.35% to 19%, including the state's largest carrier at 7.31%. This competitive environment combined with stable marketplace trends have attracted numerous carriers to California, offering physicians many options.
Overall the market in California remains relatively stable, which has even allowed several of the medical malpractice insurance companies to issue dividends or reimbursements back to their insured doctors. However, one possibility that is on the horizon is an increase in non-economic damage caps. As noted above, non-economic damages (i.e. pain and suffering) were capped at $250,000 with the passage of MICRA. This number has never been revised, but activists and attorneys have succeeded in gaining enough votes to get an initiative put on a November 2014 ballot that would raise caps to over $1,000,000. This will be something to watch. If the initiative passes it will almost certainly impact the medical malpractice insurance market, though it is hard to predict how big an impact it might have.
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