Day on Torts
Good news for all concerned. SVMIC, the doctor-owned professional liability insurer, has announced a rate reduction. You probably won’t read about falling medical liability insurance rates in the newspaper, but you can tell your friends and neighbors that rates are dropping even though the Legislature has not placed caps on damages in medical malpractice cases.
Here are the rate changes, by specialty:
Anesthesiology – 14.1%
Cardiac Surgery – 14.1%
Gynecological Surgery – 14/1%
Family Practice – non-procedural – 9.3%
Orthopedic Surgery – 9.3%
Pediatrics – 9.3%
Pulmonary & Critical Care Medicine – 5.2%
Internal Medicine + 3.3%
Infectious Disease, Hospitalists + 3.3%
Gastroenterology + 5.0%
Interventional Cardiology + 5.8%
Pathology +10.0%
Emergency Medicine +15.0%
Most other specialties – 4.5%
The overall change for all doctors in the state is a decrease of 4.2%. The rate change is effective with renewals after May 15, 2007.
Approximately 74% of doctors will get a rate reduction under the new rate structure. Conversely, 26% of doctors will get a rate increase.
The 464 OB-GYNs that are insured by SVMIC will get a rate reduction of 4.5%. An OB-GYN with five years experience will pay $59, 792 for $1M / $3M in coverage. He or she can purchase $5M / $7M in coverage for $80,505.
A FP/GP who does not do OB will pay $15,959 for $1M / 3M in coverage and can double that coverage by paying $18,896. If the FP / GP does OB work but no major surgery the rate increases to $21, 702 for $1M/3M in coverage and $25,672 for twice that amount. The rates for these docs decreased by 4.5% effective May 15.
Even these numbers tell only part of the story. These rates are list prices. The rate is decreased by 10% if the doctor attends a loss prevention seminar and 5% if the premium is paid up front, Thus, an OB/GYN who purchases a $5M/7M policy can save over $10,000 by attending a seminar (offered on-line and paying up front).
In addition, the premium includes a provision that if the doctor retires, dies, or becomes disabled during the policy period he or she is provided tail coverage at no charge. This increases rates by over 4%.
By the way, the rate decrease is projected to still permit SVMIC to increase its surplus by 5% next year. Surplus increased $33,000,000 to a total of $217,000,000 in 2006. This represented an increase of almost 18% in one year. This follows a $16.4 million dollar increase in 2005. If the projection is correct, SVMIC’s surplus will rise to almost $230,000,000 by the end of 2007. I suggest that the projection is a conservative one and, unless SVMIC grants a dividend, the surplus will be even higher.
(Surplus in the insurance industry is substantially equivalent to net worth in the traditional business world. It means that is SVMIC was to stop doing business as of 12/31/06, it could have paid all of its claims, paid all of its loss adjustment expenses, and still had $217,000,000 left. Because SVMIC is a mutual company, the surplus would become the property of the physician-owners.)
Does this mean that SVMIC is the evil empire? Of course not. SVMIC is a business. It has the right to – and should – price its product so as to protect doctors, provide for injured patients, and increase its surplus to a reasonable level given the total risk it has undertaken.
My only point is that the Legislature needs to consider these facts in determining the need for reforming the legal system to provide for special privileges for the health care industry. And it needs to ask: what will we get in return for what we are asking our injured and deceased citizens to give up?