Medical Malpractice Insurance Primer
Recently, medical malpractice insurance rates in New Jersey have trended downward as they have in most states in the U.S. Malpractice litigation has leveled off for the last 5 years and not surprisingly, the rates are following. However, physicians in New Jersey do face challenges compared to physicians in other states. Rates in New Jersey are higher than the national average. With the addition of several new options for medical malpractice insurance in New Jersey, physicians are able to find affordable coverage.
Medical malpractice insurance rates are determined by several factors:
- Practice specialty
- Geographic location (city and county)
- Claims history of the physician or group
Rates are typically higher in higher populated areas, because physicians see more patients and have more exposure to the risk of a lawsuit. In addition, the surgical specialties have higher risks associated with the procedures performed and therefore, the insurance rates are much higher than primary care specialties. Also, physicians and groups that have had claims in the past will be rated higher than others due to the available claims-free discounts.
Lawmakers in New Jersey attempted to pass a $300,000 cap on non-economic damages in malpractice cases in 2002 and 2003. Physicians rallied and lobbied for the “Patients First Act” and organized a 3 day works stoppage in January 2003. In the end, the bill did not pass. There were also efforts to place a similar limitation in 2013. Currently there is a $350,000 cap for punitive damages against a physician.
The New Jersey Medical Malpractice Liability Insurance Premium Assistance Fund
Similar to other parts of the country, New Jersey’s medical malpractice insurance market has experienced extreme swings in the cycles of the number of malpractice claims, the severity of malpractice claims, fluctuating malpractice insurance rates, and changes in malpractice insurance company profits. At times when the state’s economy has been down, there have been trends of more frequent malpractice claims and higher payouts and settlements. As these trends continue and malpractice insurance companies’ profits are eroded, they have, in the past, reacted with higher rates and stricter underwriting guidelines. Some insurance companies even stopped writing malpractice insurance in New Jersey to avoid the losses. Throughout its history, New Jersey has experienced these conditions so severely at times that many have described the situation as a “medical malpractice crisis” – a condition where physicians have difficulty finding affordable coverage. When this has happened, physicians, legislators, and insurance companies in New Jersey have responded to try to alleviate the predicament.
The most recent “crisis” in New Jersey began around 2001 when malpractice insurance rates began to rise. This uptick in rates was followed by the exiting of four malpractice insurance companies from the New Jersey market in 2002: Two companies failed and went out of business and two others stopped offering coverage because it was no longer profitable. At the time, there was a debate as to the cause of the crisis:
- Companies were previously charging irresponsibly low premiums
- Insurance companies experienced lower returns on investments
- Increases in malpractice claim severity pushed the rates up
- A combination of all the above
While the cause of the crisis may never be completely clear, the fact remains that physicians were suddenly scrambling to find insurance protection. Due to the lack of affordable coverage, New Jersey physicians stopped performing higher-risk procedures, began leaving the state for more favorable practice situations, and some decided to leave private practice to work for hospitals.
Since that time New Jersey has actively been taking steps to attract and keep doctors within its borders. Most notably, a program called the Medical Malpractice Liability Insurance Premium Assistance Fund (MMLIPA) was established to assist doctors in certain specialties with their medical malpractice insurance premiums. This program mainly aims to assist obstetricians and gynecologists in an effort to lower their annual medical malpractice insurance costs. The New Jersey Division of Consumer Affairs states that this program was created to combat skyrocketing medical malpractice premiums in the mid 2000s.
One of the next challenges for healthcare in New Jersey and all over the U.S. is the physician shortage predicted to hit hard in the 2020s. Today, there are 22,400 physicians practicing in New Jersey, and it is estimated that 1,000 to 2,000 more are needed because the Affordable Care Act will add millions of previously uninsured healthcare consumers into the system.
For now, the medical malpractice environment in New Jersey is stable. Physicians have coverage options available, rates are relatively affordable, and the frequency and severity of malpractice claims has remained level for the last several years. New Jersey passed legislation that limits punitive damages in malpractice cases to either five times the compensatory damages or $350,000, whichever is greater.
Statute of Limitations
In New Jersey, a medical malpractice claim must be filed within 2 years of the time a person discovers or should have known of the negligence. The exceptions to this limitation are for minors. In the case of an injury at birth, claims must be filed within 2 years of the child’s 18th birthday if born before 2004. The law has been recently changed to limit the time the child’s 13th birthday if born after July 2004.
Limits of Liability
New Jersey’s minimum liability limit for medical malpractice insurance is $1,000,000 per occurrence and $3,000,000 aggregate per policy period (1 year). The $1M/$3M limit is fairly standard across the U.S. In some states and mostly in rural areas, physicians are allowed to carry lower limits, but most physicians are not comfortable with lower limits. The argument for lower limits is that in the case of a lawsuit attorneys will only go after the amount of the policy limit, so the higher the limit the higher the lawsuit. However, in today’s litigious environment, the $1M/$3M limit is recommended.
Types of Malpractice Insurance Companies in New Jersey
There are 2 types of insurance carriers in New Jersey: Admitted and non-admitted. The admitted carriers are regulated by the state, licensed in New Jersey, and have rates filed with the department of insurance. On the other hand, non-admitted carriers are approved to provide insurance in the state but are not regulated by New Jersey. This gives these companies more rate and underwriting flexibility. Many of the non-admitted companies are Risk Retention Groups (RRG) that are owned by the physician insureds.
New Jersey has one of the highest total amounts of medical malpractice payouts in the country: Over $200,000,000 in 2012. While this is high, it has remained level for several years. In addition, the number of new claims in New Jersey is approximate 1,000 per year, which is down significantly from its highest point in 1999.
External Links & Resources for New Jersey Physicians & Surgeons
- Medical Society of New Jersey (MSNJ)
- New Jersey Association of Osteopathic Physicians & Surgeons (NJAOPS)
- New Jersey Podiatric Medical Society (NJPMS)
- New Jersey Hospital Association (NJHA)
- New Jersey Medical Group Management Association (NJMGMA)
- New Jersey Association of Ambulatory Surgery Centers (NJAASC)
Want to learn more about medical malpractice insurance policies in your state? Call our main office in St. Louis, Missouri, at (855) 823-5283 for all your questions about malpractice policies in New Jersey. Get your free quote today!
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