LEGISLATION; MALPRACTICE; MEDICAL MALPRACTICE INSURANCE;

INSURANCE - MALPRACTICE;

You asked for information about medical malpractice insurance rates in Connecticut and California. You also asked what types of reforms other states have tried.

SUMMARY

The Legislative Program Review and Investigations Committee (LPRIC) is studying the circumstances underlying the costs of medical malpractice insurance in Connecticut and, analyzing which factors are responsible for rising premiums. Its final report, which is due in December, will include recommendations for remedies that would be most effective in dealing with the situation.

In an interim report dated September 16, 2003, LPRIC found that depending or the insurance company, over the past 6 years (1998 through 2003), medical malpractice insurance premiums in Connecticut increased between 37% and 241% for internal medicine, 35% and 185% for general surgery, and 45% and 128% for obstetrics/gynecology. During that same period, the cumulative consumer price index (CPI) and medical CPI increased 13% and 24% respectively.

Rate increases in the 1990s were much smaller. For example, The Connecticut Medical Insurance Company’s (CMIC) cumulative rate increases from 1993 through 1997 were about 12% for these specialties, not including discounts or dividends. From 1997 through 1999 CMIC’s doctors, on average, experienced either no rate charge or a premium reduction, excluding dividends.

Other Connecticut carries that have recently field for rate increases include: (1) ProSelect, (30% overall rate increase effective November 1, 2003), (2) the Medical Protective Company (29. 1 percent effective 8/11/03), and 3) Truck Insurance Exchange (57. 3% effective 12/1/03). CMIC has indicated that its proposed overall rate increase will probable be about 30% to be effective January 1, 2003.

Medical malpractice insurance rates in California have been more stable then in Connecticut, especially in recent years. The Foundation for Taxpayer and Consumer Rights provided a year –by- year average annual change in medical malpractice premiums in California from 1975 through 2001. These figures show a fairly volatile market from 1975 through 1988 and a fairly stable market from 1988 through 2001. For example, these figures show a 6. 10% increase from 2000 to 2001.

Another secondary source, Weiss Ratings, Inc. reports in a June 3, 2003 publication that the median malpractice insurance premium in California rose for $ 20,354 in 1991 to $ 30,430 in 2002, a 49. 5% increase.

States have dealt with the recent and earlier medical malpractice insurance problem in a variety of ways. Reforms can be broken down into three broad categories (1) lawsuit or tort reform, (2) insurance reform, and (3) doctor oversight and patient safety reforms. Tort reform includes such things as (1) capping the amount that can be awarded for damages for malpractice; (2) amending “collateral source” rules that prevent providers from introducing evidence that the injured person’s expenses have been reduced by payments from third parties; (3) modifying statutes of limitation to decrease the time injured parties have to file a claim; (4) limiting “venue shopping” for malpractice cases; (5) implementing alternative dispute resolution systems such as arbitration; (6) requiring pretrial screening panels, (7) making defendants liable only for the damages they cause and (8) limiting the contingency fees plaintiffs attorneys may collect (a few states also allow or require court approval of the doctor’s attorney’s fees). We have included several recent 50 states surveys conducted by various groups that summarize tort reform laws in each state.

Insurance reform has focused on such things as prior rate approval, (see 2003-R-0090) reinsurance and patient compensation funds (see 2003-R-0243 and 2003-R-0606), screening panels (2003-R-0607), tax credits for insurance premiums, and the creation of insurance associations to provide malpractice insurance when it is very difficult or impossible for health care providers to obtain it.

Patient safety reform has focused on mandatory reporting of adverse events and analyzing serious events and incidents and implementing patient safety plans in health care facilities, reporting malpractice lawsuits as soon as they are filed (2003-R-0136) disciplining of doctors (2003-R-0653), and creating mechanisms and systems to identify why medical errors occur to create system-wide changes to prevent them from occurring in the future (2002-R-0892).

According to the Health Insurance Association of America, 41 state legislatures debated medical malpractice reform in their 2003 sessions, but only 11 passed legislation (and Missouri’s legislation was vetoed). Seven of those included caps on noneconomic damages. According to the National Governor's Association, in addition to caps, states considered shortening their statute of limitations to file suit, reducing frivolous suits by requiring mediation and pretrial screening, better medical error reporting, and more stringent doctor discipline. This report describes the 2003 legislation enacted and signed in nine states and bills passed in Nevada’s current special session on malpractice but not yet signed by the governor.

During 2002 and 2001 several states enacted laws to address this issue. We have identified legislative initiatives in Pennsylvania (a variety of reforms addressing legal, patient safety, and mandatory coverage issues); Mississippi (cap on noneconomic damages and limits on venue); Nevada (creation of a medical liability association, damage caps, and other reforms); Washington (voluntary market assistance plan); and West Virginia (tax credit for premiums paid by health care providers).

On the federal level, President Bush’s proposal for a $ 250,000 national cap on noneconomic damages has stalled in Congress. The National Conference of State Legislatures resolved at its 2003 annual meeting to oppose a national cap on the grounds that it would usurp state authority.

CALIFORNIA

Some claim that the $ 250,000 cap on pain and suffering that was enacted in 1976 was a significant factor in achieving a stable insurance market. California places a $ 250,000 “cap” on non-economic damages in medical malpractice cases (Cal. Civil Code § 3333. 2). Non-economic damages are defined as compensation for pain, suffering, inconvenience, physical impairment, disfigurement, and other non-pecuniary injury.

The cap was held to be constitutional in Fein vs. Permanente Medical Group, 38 Cal. 3d 137, app. dismissed 106 S. Ct. 214 (1985). It applies whether the case is for injury or death, and allows only one $ 250,000 recovery in a wrongful death case. There is case law authority for allowing separate caps for the patient and a spouse claiming loss of consortium (See, Atkins vs. Strayhorn, 223 Cal. App. 3d 1380, 273 Cal. Rptr. 231 (1990)).

Others argue that it was proposition 103, adopted in 1988, that has caused the stability. Proposition 103 requires insurance companies to get the prior approval from the California Department of Insurance for insurance rates they wish to charge in California. This includes medical malpractice insurance. The department uses certain standards to determine whether to approve or disapprove rates. It also required every insurer to reduce its rates at least 20% less than the rates in effect on November 1, 1987 unless it would lead to temporary insolvency.

CONNECTICUT

Connecticut enacted major tort reforms in 1986 and 1987. They included:

1. limits on attorney contingency fees;

2 periodic payment of future judgment amounts;

3. attorney good faith certification that negligence exists as a prerequisite to filing a medical malpractice action;

4. a prohibition against and monetary penalty for filing frivolous lawsuits or defenses;

5. a rule that requires the court to reduce medical malpractice awards by the amount of any collateral source (e. g. , insurance payments);

6. modification to the standard of care for health care providers involved in causes of action that accrued on or after October 1, 1986; and

7. changes to the rules on joint and severable liability with respect to insolvent defendants (PA 86-338 and PA 87-227).

Connecticut also enacted medical malpractice judgment and medical error reporting laws in 1996 and 2002, respectively (PA 96-133 and PA 02-125). We have enclosed summaries of the 1986, 1987, 1996, and 2002 acts.

LPRIC STUDY

The LPRIC study will assess the actual circumstances underlying the cost of medical malpractice insurance and analyze which factors are responsible for rising premiums, in order to determiner what remedies would be most effective. The LPRIC study will:

1. analyze medical malpractice insurance costs over a certain period of time (e. g. , 10 years) in Connecticut and elsewhere, and compare increase to other relevant types of insurance.

2. describe the medical malpractice insurance market, including number of companies involved.

3. analyze how insurance companies determine what premiums to charge doctors, reviewing the changeability of each factor over a certain period of time, including but not limited to investment earnings and loss assumptions.

4. evaluate whether the state insurance department’s role in monitoring medical malpractice rates, including insurance market competitiveness, is effective

5. analyze outcomes of Connecticut medical malpractice lawsuits in terms of damages over a certain period of time (e. g. , five years) (cognizant of possible difficulties in data availability and analysis)

6. assess impact of Connecticut tort reform efforts in late 1980s (Tort Reform I, Tort Reform II) on medical malpractice suits (e. g. case certification, limits on attorney fees)

7. examine experience in other states and review an array of initiatives to address insurance cost issues, such are guaranty funds and alternative dispute resolutions mechanisms.

CONNECTICUT MEDICAL MALPRACTICE PREMIUMS

The following information is taken virtually verbatim from the September 16, 2003, LPRIC interim report. The full report is available on LPRIC’s web site. LPRIC concluded that Connecticut medical malpractice rates have increased recently, and the extent of the increase varies both by medical specialty and by insurance company (http: //cgalites/2003/pridata/Studies/PDF/Medical_Mal_Briefing. PDF. )

The LPRIC interim report contains several figures to demonstrate these increases.

Figures V1 and V2 below illustrate changes in base premiums charged by carriers of medial malpractice insurance in Connecticut for internal medicine, general surgery, and obstetrics/gynecology. Premium rates are based on annual rates for claims-made policies with a cap of $ 1 million per incident and $ 4 million per year except The Doctor’s Company, which provides a $ 1 million per incident and $ 3 million per year policy. (These three specialties are selected because they generally represent low-, medium-, and high-risk specialties. ) These figures are based on annual surveys conducted by the publication Medical Liability Monitor (MLM) for the years 1996 through 2002 and data provided by the Connecticut Insurance Department for 2003.

LPRIC noted that a few qualifications of the data are necessary.

• MLM data are not a complete survey of all insurance carriers offering medical malpractice insurance each year.

• Base premium rates will vary from what an individual doctor is charged based upon potential discounts or surcharges for which the doctor is eligible or liable.

• It is difficult to convey the magnitude of price changes in premiums because the data do not fully capture how many doctors are affected in particular specialties. For example, the highest rate quoted in 2003 in Connecticut for OB/GYN malpractice insurance is more than $ 120,000, but that company insures fewer than 20 OB/GYNs. On the other hand, one of the largest OB/GYN group practices in Connecticut, with about 150 doctors, has experienced a rate increase of about 73 percent – from about $ 55,000 per physician in 2002 to about $ 95,000 in 2003. In addition, the survey does not include doctors insured by captives or alternative providers. (We describe these on page 11 of this report).

PRI staff reviewed the MLM survey data and in combination with data available at the insurance department, despite its limitations, found the information provides an indication of the trend that has occurred in the traditional medical malpractice insurance market.

Source: LPRIC analysis of Medical Liability Monitor and CT Insurance Department data, 2003

Figure V-1 presents the percentage increase in the base premium of the largest medical malpractice insurers in Connecticut for the years 1998 through 2003 for three specialties and provides a comparison to the consumer price index (CPI) and the index for medical costs (Med CPI). LPRIC noted in summary, the figure depicts that:

• Over the last six years (1998 through 2003), premiums increased between 37 and 241 percent for internal medicine, 35 and 185 percent for general surgery, and 45 and 128 percent for obstetrics/gynecology depending on the company.

• Over the same time period, the cumulative CPI and Medical CPI have increased 13 and 24 percent respectively.

• In comparison, rate increases in the 1990s were considerably smaller. For example, CMIC’s cumulative rate increase from 1993 through 1997 was about 12 percent for these three specialties, not including discounts or dividends. From 1997 through 1999, CMIC insureds on average experienced either no rate change or a reduction in their premium, not including dividend payments.

• The premiums do not include the most recent rate filing by the carrier ProSelect, which is requesting a 30 percent overall increase in rates effective November 1, 2003. Other Connecticut carriers that have recently filed for rate increases include: The Medical Protective Company (29. 1 percent overall increase effective 8/1/03), and Truck Insurance Exchange (57. 3 percent overall increase effective 12/1/03).

Source: Medical Liability Monitor annual rate survey, 1996-2002. CT Insurance Department 2003

Figure V-2 shows high and low premiums for selected specialties from 1996 through 2003. It illustrates the variability among different insurers, among different specialties, as well as the year-to-year variability in premium. As expected, rates vary greatly across specialties. Based on the survey data, the highest rate for an internist in 2003 is about $ 21,000; an obstetrician’s highest rate is about $ 120,000. The differences in rates, according to insurers, mirror the costs associated with each specialty’s malpractice claims. It also shows the general premium trend for all specialties begins to increase noticeably in about 2001 and 2002. It can be noted between 1996 and 2003:

1. The lowest rate paid by internists increased 133 percent, while the highest rate increased 150 percent.

2. The lowest rate paid by a general surgeon increased 69 percent, while the highest rate increased 172 percent.

3. The lowest rate paid by obstetrician/gynecologists increased 87 percent, while the highest increased 119 percent.

Source: CMIC rate filings, 1993-2003

The annual average rate increases, across all specialties, submitted by CMIC to the Connecticut Insurance Department from 1993 through 2003 was also examined as a way to measure change in premium. Figure V-3 presents the high, midpoint, and low rate changes recommended by CMIC’s actuaries and the actual rate changes selected by CMIC. From 1993 through 2000, there are very little differences between the three rates.

1. In five out of the seven years from 1993 through 1999, CMIC submitted either no increase or a decrease in the average rate. In 1994, the average increase was 6. 5 percent and in 1996, it was 5 percent.

2. In five of the eight years from 1993 through 2000, CMIC selected the recommended mid-point change for each year. The exceptions were: 1993 – the range was from about a 4 percent increase to a 7 percent decline and it selected no (zero) change; 1997 – the range was from a high of a 5 percent increase to no (zero) change and it selected no change; and 1999 – it did not file for a rate change.

3. For each of the three years, from 2001 through 2003, CMIC selected an average rate increase that was less than the lowest one recommended by its actuaries. CMIC reduced or eliminated discount programs to compensate for the difference.

Traditional Market

The number of insurers who provide medical malpractice insurance in Connecticut has fluctuated over the last decade from a low of 32 to a high of 52. The latest figures from the Connecticut Insurance Department indicate there were 41 insurers licensed and providing some form of medical malpractice coverage in 2002. But, the top five insurers covered 79 percent of the market.

This apparently large number of insurers is misleading and some qualifications are necessary. As discussed further below, the majority of providers comprise a very small percentage of total market share. In addition, some insurers have restrictive underwriting guidelines, including not offering coverage to new clients. As discussed earlier, several medical professions other than traditional (osteopathic) physicians are required to maintain malpractice insurance, such as chiropractors, naturopaths, podiatrists, and dental hygienists, and some insurers solely or primarily provide coverage to a particular specialty. Thus, the actual range of choices for any particular physician may be quite small. Currently, the Insurance Department states that five companies are actively writing malpractice insurance (that is accepting new clients) for physicians in Connecticut (Connecticut Medical Insurance Company, ProSelect, The Doctor’s Company, Medical Protective, and Truck Insurance).

As table I-1 shows, the top five insurers over the last decade have written between 71 and 93 percent of the total medical malpractice premium in Connecticut. The top two have written over 50 percent of total premium and one company alone has consistently written over one-third of the coverage. This does not appear to be unusual. One national study suggests the average market share for the largest single medical malpractice writer in each state is about 36 percent and the top two writers in each state average a total market share of about 56 percent.

Alternative Markets

Historically, most businesses have handled risk by transferring risk to an insurance company by purchasing an insurance policy. More unconventional mechanisms for handling risk began to grow during the liability crisis in the 1970s and 1980s, when businesses had difficulty obtaining some types of overages. Recently, growth in the use of alternative mechanisms has been reported in managing malpractice risk. Broadly speaking, these mechanisms include:

• Self-insurance, where a firm or group of firms assumes all or much of its own risk exposure. In many cases some form of insurance is purchased to cover catastrophic losses;

• Captives are companies that are set up (and wholly-owned) by one or more entities to finance and administer their insurance risk. The assets of a captive are owned by its insureds. Large numbers of captive companies are domiciled in Bermuda, the Cayman Islands, and Vermont. There are about 300 captive for U. S. health care providers according to the actuarial firm Tillinghast-Towers Perrin; and

• Risk-retention groups consist of a number of firms or individuals that come together to form a limited purpose insurer. It must be chartered and licensed as a liability insurance company under the laws of at least one state, but the group can write insurance in all other states. Risk-retention groups are organized under federal law, the Liability Risk Retention Act of 1986, which preempts certain state laws that regulate the activities of these groups.

There are various tax and risk advantages and disadvantages to establishing one of the above alternatives. Generally, these alternatives to traditional insurance are created in part to save money because insureds recoup the investment income that would typically accrue to the insurer’s bottom line, but at the same time providing a stable form of coverage. Disadvantages to insurance alternatives include the amount of funding needed to initially establish and operate a captive or risk-retention group. Further, these alternative ventures still require the purchase of reinsurance to protect them from unusually high claims.

In Connecticut, many hospitals have been using alternatives to traditional insurance for some years. According to the Connecticut Hospital Association (CHA), of the 31 acute care hospitals in Connecticut, 13 self-insure or are part of a risk retention group, 12 are part of a captive, and six maintain commercial insurance. In addition, 13 members of CHA are exploring the feasibility of creating or joining a captive.

Moreover, the Women’s Health Connecticut, a group practice of OB-Gyns with about 150 physicians, is in the process of forming a captive after receiving notice of a 70 percent premium increase.

LPRIC staff intends to explore the experience of medical-based captive and risk retention groups in the staff findings and recommendations report.

2003 LEGISLATIVE CHANGES

Caps on Noneconomic Damages

Seven states adopted caps on noneconomic damages, that is compensation for pain, suffering, physical disfigurement, and other nonpecuniary damages that are not compensable as medical expenses or lost earnings. Table 2 describes their provisions.

Table 2: 2003 Legislation Capping Noneconomic Damages

Sources: National Conference of State Legislature (April 2003) and BNA reports.

OTHER TORT REFORM MEASURES -2003

Arkansas

Arkansas passed legislation requiring clear and convincing evidence before punitive damages (i. e. , damages awarded to punish the individual responsible for the injury) can be recovered and limits them to the greater of $ 250,00 or three times the compensatory damages (i. e. , those directly related to the injury), up to $ 1 million. It made each defendant's liability for punitive damages several only and not joint, with the percentage of fault based on all parties who contributed to the alleged harm regardless of whether they were party to the suit (HB 1038). (In joint liability, each party is potentially responsible for all damages; where liability is several, a party is responsible only for the portion of damages attributable to it).

Delaware

Delaware’s legislation requires malpractice suits be accompanied by an affidavit of merit from an expert witness stating that there are reasonable grounds to believe negligence occurred (HB 310).

Florida

In addition to its cap on noneconomic damages (see Table 1), Florida’s comprehensive medical malpractice bill, contains a variety of other reform measures. These include:

1. freezing malpractice premiums through December 31, 2003 and requiring insurers to reduce rates retroactively based on state estimates of how much the new law will save them;

2. requiring hospitals and doctors to tell patients when they are injured, although courts cannot consider these statements as admissions of liability and plaintiffs could not introduce them as evidence;

3. requiring hospitals and surgical centers to adopt patient safety plans and appoint patient safety committees and officers;

4. allowing insurers seven months to study malpractice suits and offer settlements;

5. allowing doctors to sue insurers for “bad faith” acts when courts issue large damage awards against them and their insurers failed to offer settlements;

6. requiring the state to suspend the license of practitioners who do not pay damage awards within 30 days; and

7. requiring insurers, doctors, and hospitals to provide the state with more information on premium rates, medical errors, and malpractice suits (SB 2-D).

Idaho

In addition to reducing its cap on noneconomic damages (see Table 2), Idaho limited punitive damage awards to the greater of $ 250,00 or three times the compensatory damages award (HB 92).

Nevada

The Nevada legislature is currently in special session to address medical malpractice issues. It has enacted legislation to protect physicians when malpractice insurers decide to leave the market by requiring such insurers to inform the state 120 days before they withdraw. In addition, the state insurance commissioner could require an additional 60 days in cases where affected physicians would not have access to other malpractice coverage (AB 320).

Legislators also enacted a bill that prohibits insurers from increasing malpractice premium rates because of investment losses (SB 122).

New Hampshire

Recent legislation prevents malpractice lawsuits filed based on the “loss of opportunity” for an improved life. The law reverses a 2001 state Supreme Court decision that expanded the rights of plaintiffs to sue for damages, but it does not prohibit lawsuits against physicians for negligence that “proximately caused the ultimate harm” (SB 119).

Ohio

In addition to caps on noneconomic damages (see Table 1), legislation enacted in January 2003 contained a collateral source rule provision that allows a defendant to introduce evidence of any amount payable as a benefit to the plaintiff as a result of damages that result from injury, death, or loss to person or property subject to the claim. If the evidence is introduced, the plaintiff may introduce evidence of any amount they have paid or contributed to secure the rights to receive benefits.

Other provisions in this new law allow a defendant to ask the court to conduct a hearing on whether a reasonable good faith basis exists for the claim made against him. If the court finds no such basis, it will award the defendant all court costs and reasonable attorney's fees he incurs.

If the agreed upon attorney’s fees exceed the amount of damages for noneconomic loss, the act makes them subject to probate court approval. It also provides for periodic payments of awards over $ 50,000 (SB 281).

Oklahoma

In addition to capping noneconomic damages (see Table 1), Oklahoma reduced the amount of prejudgment interest allowed in medical and nursing home liability cases. It eliminated the award of plaintiff attorney's fees in nursing home cases and required dismissing medical and nursing home suits if the defendants were not served papers within 180 days of the suit being filed (SB 629).

Texas

HB 4 amends Texas’ medical liability laws concerning limits on liability in malpractice cases (see Table 1); informed consent; cases involving emergency care; litigation matters such as expert reports, the structure of attorney’s fees, and filing deadlines; and recovery of medical expenses.

Informed Consent. The act creates a nine-member Texas Medical Disclosure Panel consisting of lawyers and doctors that must determine which risks related to medical care must be disclosed and which procedures may be performed only after disclosing the risks. It must establish a general disclosure form and develop written materials for disclosing risks associated with hysterectomies. Compliance or failure to comply with the required disclosure is admissible into evidence and creates a rebuttable presumption of either informed consent or lack thereof. Failure to disclose may not be found negligent if doing so would have been medically infeasible, such as in an emergency.

Emergency Care. HB 4 repeals the immunity from liability for emergency procedures performed by “good Samaritans” and replaces that immunity with a standard of proof in such cases. A claimant must prove that the treatment or lack of treatment deviated, with willful or wanton negligence, from the degree of care and skill that could be expected from an ordinarily prudent physician in similar circumstances. This provision does not apply to cases involving treatment after the patient is stabilized or to remedy an emergency caused by a provider.

Pretrial Matters. A claimant must provide written notice of a claim at least 60 days before filing a suit and must authorize in writing the disclosure of medical records. All parties have access to the patient’s medical records and standard discovery interrogatories within 45 days of a request. Filers of claims must submit only an expert report and no longer must submit a cost bond. If a claimant fails to serve each party an expert report and the expert’s curriculum vitae within 180 days after filing the claim, the court must dismiss the claim with prejudice and must order the claimant to pay the defendant’s attorney fees and court costs. The required expert report may not be introduced into evidence or referred to by either party in the course of the action, but either may introduce any other expert report The bill also establishes qualifications for expert witnesses testifying in a claim.

Recovery. A court must order periodic payments, rather than a lump-sum payment, at the request of either the defendant or the plaintiff when an award is $ 100,000 or more. To be allowed to make periodic payments, the defendant must show financial responsibility in the form of an insurance policy, bond, or other proof of ability to make full payment. If a recipient of periodic payments dies, all payments except loss of earnings cease and any remaining security is returned to the defendant.

West Virginia

Legislators enacted a comprehensive new law (HB 2122) in March 2003 that contains caps on noneconomic damages (see Table 1) and other provisions. These other provisions include:

1. an annual tax credit equal to 21% percent of physicians’ adjusted medical liability insurance premiums;

2. collateral source reform, which requires a court to reduce a plaintiff’s award by the net amount he has received from other sources;

3. a $ 500,000 cap on civil damages for injuries or deaths resulting from emergency care in designated trauma centers;

4. requirements concerning expert witnesses’ knowledge, professional activity, and licensure;

5. a requirement for claimants to notify the defendants at least 30 days before filing a suit and provide a certificate of merit from an expert health care provider;

6. the creation of a new physicians’ mutual insurance company to replace the current Board of Risk and Insurance Management plan (all licensed physicians had to pay a one-time fee of $ 1,000 to support the new company); and

7. the creation of a board to study whether to establish a patient compensation fund and how to fund it (HB 2122).

2002 AND 2001 LEGISLATIVE AND RELATED CHANGES

We identified initiatives in Pennsylvania, Mississippi, Nevada, Washington, and West Virginia that were enacted in 2002 and 2001. We did not attempt to identify reforms enacted in every state during these years.

Pennsylvania

Two recent pieces of legislation adopted in Pennsylvania attempt to stabilize the medical malpractice insurance market in the state (Act 13, (HB 1802) and SB 138). Act 13, signed into law on March 20, 2002, includes legal reforms, patient safety initiatives, and a phase-out of the state’s excess malpractice liability insurance fund.

Legal Reforms

The legislation requires that future damages of more than $ 100,000 for medical and noneconomic loss must be made in periodic payments rather than in a lump sum. It also modifies the “collateral source rule” by barring a plaintiff from recovering money for past medical costs or lost earnings already covered by insurance or other sources.

The act changed the statute of limitations for filing a medical malpractice lawsuit. Previously, a patient had two years to file a claim after the date he should have known of the injury. Under the new law, the plaintiff must file the claim within seven years from the date of the alleged incident of malpractice.

A provision that would have eliminated “joint and several liability” for noneconomic damages to the extent they exceed $ 1 million was cut from the final version of the bill that passed. (“Joint and several liability” is designed to protect victims in cases where more than one party is found liable or responsible for the injuries by holding that each is completely responsible for the damages if any other party fails to pay its portion. )

But an “ostensible agency” provision was included that in effect makes it more difficult to bring a hospital into a lawsuit against an independent provider that is not employed by the hospital (e. g. , a radiology practice) just because it is located in the hospital.

The new legislation establishes standards that a person must meet to qualify as an expert witness in a medical professional liability action. A medical expert must be a physician engaged in active clinical practice or teaching and experienced in the care at issue. Experts on the standard of care must be of the same or similar specialty as the defendant and be board certified in the same or similar specialty.

Act 13 created a joint judicial/legislative commission charged with recommending legislative and procedural changes by September 1, 2002, to address problems associated with “venue shopping” in malpractice suits. This commission’s work resulted in passage of SB 138 in October 2002, which provides that a medical malpractice claim against a health care provider can be brought only in the county in which the cause of action arose. Under prior law, cases could be moved to another county for a variety of reasons. The Pennsylvania Trial Lawyers Association opposed this new venue limit, arguing that it would further complicate and delay complex medical malpractice cases involving patients who were transferred from a rural medical facility to an urban center (see BNA’s Health Law Reporter, October 17, 2002, p. 1481). The trial lawyers group also raised constitutional questions about the new venue rule, arguing that (1) venue questions have traditionally been the prerogative of the judicial branch and (2) new venue rule violates the equal protection clause of the state constitution because it only applies to medical malpractice cases but not other types of personal injury cases.

The new law permits defendants to seek a reduced verdict. The court would consider the impact of the verdict on the availability of or access to health care in the community. A court may also limit the amount of security that must be posted on appeal to the amount of the available insurance coverage, if the court finds that additional security would effectively deny the right of appeal.

Patient Safety

Act 13 creates a Patient Safety Authority responsible for contracting with an organization to collect, analyze and evaluate reports of serious events and incidents. This includes identifying patterns and directly advising medical facilities of immediate changes they can institute to reduce serious events and incidents. The authority is funded through surcharges on medical facility licensing fees. To assist the authority, the state Department of Health is required to review and approve all medical facility patient safety plans and investigate serious events and infrastructure failures.

The law requires medical facilities to develop to develop patient safety systems that allow health care workers to report medical errors without fear of retaliation. Facilities must also report to the Health Department and the authority within 24 hours on confirmed medical errors or serious events and infrastructure failures. The new law mandates that physicians report to the state (1) all civil complaints filed against them and (2) if they have been subject to disciplinary action in another state.

Mandatory Coverage Changes

Beginning in 2003, Act 13 reduces physicians’ total required malpractice coverage to $ 1 million from $ 1. 2 million. This change is part of a gradual phase-out of the state-administered excess coverage layer. Under the new law, physicians must have $ 500,000 in basic insurance coverage and $ 500,000 in excess coverage through the state-administered Medical Care Availability and Reduction Error Fund (MCARE). This fund replaced Pennsylvania’s Medical Professional Liability Catastrophic Loss (CAT) Fund on October 1, 2002. This change is expected to affect surcharges for the excess coverage over the next several years as claims with the lowered limit work their way through the court system.

Immediate discounts are available to physicians on the excess coverage surcharge under the MCARE Fund. For 2002, the discount is estimated at 7 to 8% for hospitals and high-risk physicians (e. g. OB/GYNs, orthopedic surgeons, neurosurgeons) and 2. 5% for all others. For 2003 and 2004, the discounts are estimated at 14 to 16% for hospitals and high-risk physicians and 5% for all others. The state is

subsidizing these discounts and the longer-term phase-out of the state-administered excess coverage layer with funds from its Auto Catastrophic Loss Fund (“Auto CAT Fund”). This fund is financed from speeding tickets and other traffic violations. The total subsidy, over 10 years, is estimated at $ 400 million.

Physicians coming out of residency programs receive an additional discount on the annual excess coverage surcharge for the first four years of practice.

Mississippi

Mississippi recently passed legislation (HB 2 of the 3^rd Extraordinary Session) that puts limits on medical malpractice lawsuits. This law, which takes effect January 1, 2003, caps noneconomic damages (“pain and suffering”) in medical malpractice cases at $ 500,000, increasing incrementally to $ 1 million by 2017. The cap would not be adjusted further for inflation. Another significant provision of the new law requires that lawsuits be filed in the county where the alleged injury occurred.

The Mississippi State Medical Association, as well as nursing groups and hospital administrators, supported the legislation which was a compromise measure following a month-long standoff between the Mississippi Senate and House. The Mississippi Trial Lawyers Association did not believe that the legislation addressed the immediate malpractice insurance crisis in the state (see BNA’s Health Law Reporter, October 10, 2002, p. 1453-54).

Nevada

Medical Liability Association

In March 2002, the Nevada Board of Examiners approved $ 250,000 in start-up costs to set up the Medical Liability Association of Nevada, which was expected to provide coverage soon after. The state insurance commissioner approved emergency regulations establishing procedures and requirements for a risk sharing plan to provide basic liability insurance for eligible medical professionals on a self-supporting basis. The association is not intended to compete directly with the voluntary market and is considered to be a ‘temporary solution” (see BNA’s Health Law Reporter, April 18, 2002, p. 565). Nevada is considered one of a half dozen states with the highest malpractice premiums.

The St. Paul Companies, a leading malpractice insurer nationwide, withdrew from the market in December 2001. That company insured about half of Nevada’s doctors, and no other insurer had expanded its business to make up the difference according to the insurance department (see BNA, April 4, 2002, p. 525).

Cap on Damages and Other Reforms

Assembly Bill 1, which passed the General Assembly in special session requires:

1. a $ 350,000 noneconomic damage cap in medical malpractices cases;

2. a $ 50,000 limitation on damages brought against doctors and hospital when treating emergency trauma patients;

3. a three-year statute of limitation for suits filed on or after October 1, 2002, but before October 1, 2005, and a two-year statute of limitation for suits filed on or after October 1, 2005;

4. judges be given discretion to enter judgments that provide that money for future damages be paid periodically;

5. establishment of expedited procedures for medical malpractice cases and elimination of the medical and dental screening panels;

6. attorneys to personally pay the cost and expense that result from their unreasonable conduct in civil litigation;

7. district court dismissal, without prejudice, of any medical malpractice lawsuit filed without an affidavit, submitted by a medical expert who practices or has practiced in an area substantially similar to the type of practice engaged in at the time of the alleged malpractice, supporting the allegations contained in the lawsuit; and

8. the Nevada Supreme Court to establish, by court rule, mandatory medical malpractice training for each district judge assigned medical malpractice cases (Chapter 41, NRS).

Washington

In May 2002, Washington insurance commissioner Mike Kreidler announced the creation of a voluntary market assistance plan (MAP) to help health care providers obtain medical liability insurance coverage. This program will consist of various insurers that provide medical malpractice insurance. When insurers pull out of the medical malpractice market and providers find themselves without coverage, the providers may submit a single application to MAP and then wait to receive quotes from the best-suited insurers participating in the plan.

This plan is expected to promote a competitive market and drive down malpractice insurance premiums. According to the Office of the Insurance Commissioner, 60% of the market for medical liability insurance has agreed to participate.

The commissioner has also established a secondary plan in the event that the voluntary system does not get the necessary number of insurers to operate effectively. (see Reforming the Medical Malpractice Insurance Market, NCSL State Legislative Report, Volume 27, No. 13, July 2002).

West Virginia

Legislation adopted in 2001 (HB 601 of the 6^th Special Session) established a tax credit for medical liability insurance premiums paid by health care providers. The purpose of the legislation is to decrease the cost of medical liability insurance premiums on physician’s services in order to encourage them to continue practicing in the state. These insurance payments qualify for the tax credit if they are made to ensure against medical liabilities arising out of, or resulting from, services provided by a physician while practicing in service to, or under, the organizational identity of an eligible taxpayer organization, or as an employee of an eligible taxpayer organization. Such insurance would have to cover the medical liability of: (1) the eligible taxpayer organization, (2) one or more physicians practicing for or under the organizational identity of the eligible taxpayer organization, or as an employee of the eligible taxpayer organization, or (3) any combination.

The tort reform provisions of House Bill 601:

1. prohibit third-party bad faith claims and provides that first-party claims cannot be filed until the conclusion of the underlying lawsuit (third-party bad faith suits are where the patient, in addition to bringing a malpractice suit against a healthcare provider, sues the provider's insurer for handling the claim in bad faith);

2. require a notice of claim and screening certificate of merit 30 days before the plaintiff files a claim and gives the healthcare provider the option to request pre-litigation mediation;

3. require medical records to be provided on an expedited basis (30 days from request of either the plaintiff or defendant), but if a dispute arises over the relevance of the records, the judge decides if the parties should share them;

4. provide timeframe standards for handling medical malpractices cases (status conference within 60 days and trial date within 24-months) and requires additional mediation before trial;

5. provide procedures for summary jury trials, subject to approval of both parties. (In a summary jury trial, six jurors are selected and a specific amount of time is allotted to defense and plaintiff attorneys to give what are essentially summary statements. Within one day after the trial is over, the jury is directed to reach a consensus. Decisions are neither non-binding nor admissible in court if the case later goes to trial);

6. expands juries in medical malpractice cases from six to 12 members and requires nine of the 12 to be in agreement for a verdict;

7. increases the filing fee for medical malpractice cases from $ 85 to $ 250, $ 165 of which goes to the Board of Risk and Insurance Management, which offers insurance to healthcare providers who are unable to obtain it on the private market; and

8. makes the reforms effective for all civil actions filed on or after March 1, 2002.

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