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.
Finding affordable medical liability coverage was difficult and some doctors were forced to shut their doors. The governor of California was forced 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: 133,642
- Total Written Premiums in California $114,811,585
- Total Amount of Incurred Losses: $40,950,522
- Loss Ratio: 36.93%
- Number of companies: 34
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 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 its intention to regulate and stabilize the medmal marketplace, benefitting patients and doctors alike. The decade following the enactment of MICRA was seen as the most profitable for liability insurance, causing California to become an example for tort reform in other states. When the 2000s hit, loss ratios and premiums began to increase again, forcing 1/3 of the policy-writing insurance companies to leave the marketplace.
This change in the medmal insurance climate stemmed from a handful of factors. First, a very small amount 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 working in tandem caused the price for malpractice insurance to naturally rise with the trends of diminishing supply and constant demand in the Californian market.
California Medical Malpractice Insurance Market Today
Despite the fluctuating trends in the years following MICRA, 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 and stable marketplace trends have attracted numerous carriers to California, offering physicians myriad options. These choices of liability insurance carrier types include: Admitted Carriers, Surplus Lines Carriers and Risk Retention Groups (RRG).
The market in California has been labeled as a soft market, meaning there have been fewer malpractice claims over the past several years. This allows several of the medical malpractice insurance companies to issue dividends or reimbursements back to the insured doctors.
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