1 view: Low rates, lawsuits spurred crisis

The answer, one insurer says, is to make losers of medical malpractice suits pay all costs.
By WILLIAM K. ALCORN
VINDICATOR HEALTH WRITER
YOUNGSTOWN -- The medical malpractice insurance crisis in Ohio is the result of too many lawsuits' being filed, combined with unrealistically low premiums for several years, an insurance executive said.
It's not the cost of malpractice suit settlements that is causing insurance carriers to raise premiums to remain solvent, or driving them out of the state or even out of business.
It is the cost of defending the large numbers of suits filed, said James E. Lang, president of Insurance Buyers Service.
The Ohio State Medical Association is supporting tort reform as an answer to the drastically increased rates that have some Mahoning Valley doctors saying they will have to move their practices to another state or retire. The proposed Senate Bill 281 would limit awards for pain and suffering.
But, Lang said, passage by the Legislature won't mean anything unless the makeup of the Ohio Supreme Court changes. Medical malpractice tort reform was passed twice in the last decade. But each time, upon appeal of trial lawyers who argued it infringed on people's rights, the state's top court voted 4-3 to declare it unconstitutional, he said.
Suggestions
The real answer is to make losers of malpractice suits pay attorney fees and court costs for both sides.
It also might help to limit the portion of settlements that lawyers can receive to 20 percent, Lang said. There are times now when lawyers end up with more of the settlement than their clients, he noted.
Lang places the blame for the medical malpractice insurance crisis on both the legal profession and insurance industry: Lawyers for filing too many suits, and insurers for not charging realistic premiums in the past.
Lang said that a recent story in The Wall Street Journal said a decade of price slashing led to insurance industry losses.
Lang recounted the recent history of medical malpractice insurance in Ohio. Before 1975, the state Legislature had established the Joint Underwriting Authority to take care of the medical malpractice insurance crisis of that time.
Two insurance companies formed: Physician Insurance Co. of Ohio, which had about 35 percent of the doctors; and Physician Insurance Exchange, which covered about 55 percent of physicians.
From 1975 to 1988, PICO and PIE were profitable, leading other insurance companies to believe there was money to be made in Ohio.
They moved in and carved out a share of the business by cutting premiums. PICO and PIE cut rates to retain their business, and that's where the most recent problem started, Lang said.
As insurance carriers were cutting rates, the severity and frequency of claims were increasing. The result was that PICO was sold to Medical Assurance and PIE went bankrupt.
Lang said that three or four years ago, Insurance Buyers Service represented 12 companies that were active in the medical malpractice insurance market in Ohio. Now, eight of those insurance companies have left Ohio because of bankruptcy or voluntary withdrawal, leaving physicians to scramble for insurance.
The four remaining companies don't have the financial means to take on all these risks. When they do take on a physician, to remain solvent they are charging a premium that is substantially higher than the physicians had been paying.
"I don't think they are trying to gouge the physicians. They are trying to make up for the years they underpriced their product," Lang said.
If tort reform is enacted, the worst possible thing that could happen would be for the Ohio Department of Insurance to mandate that insurance companies reduce their rates. "They'll pull out of the state," he predicted.