DIGEST

· The purpose of medical malpractice insurance is twofold: 1) to protect health care practitioners from the negative economic consequences of being found negligent in their medical practice; and 2) to provide compensation for individuals who suffer harm from negligent doctors.

· An estimated 7,000 active patient care physicians in Connecticut are required to be insured for malpractice, along with six other types of health care practitioners. Hospitals and other health care institutions are also exposed to malpractice risks.

· Most malpractice insurance policies cover claims made during the policy year, and a typical individual coverage limit is $1 million per incident with an annual aggregate limit of $4 million.

· The medical malpractice market is cyclical in terms of premiums charged, profits, and insurance availability, where a "soft" market is characterized by stable or declining prices, and a "hard" market has significant price increases and availability problems.

· The medical malpractice market consists of the traditional market, which comprises commercial and mutual insurers, and the alternative market, which is made up of a number of different financing arrangements that allow related organizations to come together to insure themselves.

· The top five medical malpractice insurers in Connecticut over the last decade have written between 71 and 93 percent of the total premium, and the top two have consistently written over 50 percent of total premium.

· As of September 2003, there were five companies actively writing individual medical malpractice policies in Connecticut according to the Insurance Department.

· Four significant new medical malpractice carriers have entered the Connecticut market over the last decade, and of the four, two remain.

· Two established medical malpractice carriers have either left the market or no longer write individual polices on a nationwide basis, including Connecticut.

· The alternative market for managing medical malpractice exposure has reportedly grown. Only six of the 31 acute care hospitals in Connecticut maintain commercial insurance as their primary means of handling malpractice risk.

· Medical malpractice is a tort (a civil wrong) and occurs when a doctor fails to exercise the same degree of skill and care--the standard of care --that doctors in the same specialty ordinarily exercise in like cases, with resulting harm.

· Two public policy goals underpin tort law: 1) an innocent person who is harmed should be compensated by the person who did the harm, if that person acted in breach of a reasonable standard of care; and 2) such accountability will deter future negligent actions.

· Connecticut has in place many tort reform provisions intended to reduce the financial impact of personal injury suits but their utilization is varied.

· Common law and statutes allow for economic and noneconomic damages to compensate for losses.

· Most medical malpractice claims are resolved through the civil lawsuit process, which includes a formal filing of a complaint and answer by the parties, a discovery phase for information gathering, and opportunities for settlement between parties throughout the process.

· Damage caps with varying characteristics are in place in 25 states. When caps were adopted also varies. The earliest was in 1975, several were enacted in the mid-1980s, and a few states just enacted the provisions.

· Logically, placing a limit on the amount of recovery should lower rates, all other factors staying the same. Prospectively determining cap impact on rates and the amount of that impact, though, is a complicated exercise.

· Forty-three Connecticut plaintiff awards in medical malpractice cases totaled $54.5 million dollars in the aggregate, made up of $9.5 million in economic damages (21 percent) and $45 million in non-economic (79 percent).

· The average total award amount was $1,266,348, with the average economic damage amount $220,927 and the average non-economic damage amount, $1,045,420. The median total award amount was $600,000. The difference between the average and the median amounts indicates the wide spread of individual award amounts.

· The individual awards ranged from a low of $30,040 to a high of $8,120,000. Fifty percent of the awards were $600,000 and below; the top 25 percent ranged from $1.8 million to $8.1 million.

· Thirteen of the 43 verdicts also had interest added to them under the offer of judgment (OOJ) statute.

· While the committee believes that a cap (depending on the size) would have a beneficial impact on medical malpractice rates, determining how much of an impact is essentially speculative, with CMIC's actuaries citing a possible 10 percent reduction to any rate increase for one year based on a $250,000 cap.

· However, that potential benefit disrupts integral components of our current civil litigation system, that is, the jury as fact-finder and the validity of non-economic damages. Indeed, cap proposals can be viewed as a tacit acknowledgement that the current litigation system does not work. Recognizing that modern day medicine and the traditional tort system are at such odds that the underlying goals of compensation and deterrence are not being met, instead of caps, efforts should focus on developing a more effective and broad-based patient-centered safety effort, with all the necessary emphasis on individual accountability.

· To respond to the immediate high premium rate problem for physicians, especially those in high-risk specialties, the committee believes a direct premium assistance fund approach is a more targeted solution.

_ an annual charge to all licensed physicians of $100 annually (13,000 x $100=$1,300,000);

_ an annual charge to all hospital of $5,000 (31 x $5000=$155,000); and

_ an annual fee to all attorneys licensed of $50 (32,106 X $50 =$1,605,300).

· There are four major determinants of insurance pricing: expected losses, expenses, profit and contingencies, and investment income.

· In general, losses, expenses, and profits and contingencies are added together, while investment income is subtracted to get a projected price.

· Individual premium rates for medical malpractice insurance will vary according to the claims costs by medical specialty.

· The cost to pay for losses is the largest component of the premium.

· Insurance companies selling medical malpractice insurance are regulated by the Insurance Department as a property/casualty type insurance.

· The regulation begins at entry into the Connecticut market with license requirements. Once licensed, a company must abide by certain financial strictures and comply with numerous reporting and review mandates.

· Connecticut uses the "file and use" method of rate review, which does not require prior approval of rates.

· State statutes prohibit excessive, inadequate, or unfairly discriminatory rates. The Connecticut Insurance Department reports no medical malpractice insurance rates have in memory been found excessive, inadequate, or discriminatory.

· The insurance commissioner and other members of the department who review rate filings have stated the medical malpractice insurance market in Connecticut is not competitive.

· A non-competitive market does not serve the interests of consumers, especially those like physicians who are required to purchase medical malpractice insurance.

· Other states have stronger regulatory frameworks for setting medical malpractice rates than Connecticut.

· No medical malpractice rate filing in Connecticut, in recent memory, has been found to be excessive or inadequate.

· Recent history in the medical malpractice insurance marketplace, on both the national and state level, has exhibited two contrasting trends - growing insolvencies and reported excess reserves.

· The insurance department does not maintain adequate information to gauge market competition.

· The insurance department does not have a clear and complete picture of the premiums charged in the medical malpractice area.

· The medical malpractice insurance market is changing and the insurance department has limited or no regulatory oversight over some of these newer risk mechanisms.

_ a public hearing on the proposed change may be requested by a consumer or his or her representative within 45 days of public notice; or

_ the commissioner may hold a public hearing regarding the rate change on his or her own motion; or

_ in the absence of a request for a public hearing by a consumer or his or her representative, the commissioner may approve or disapprove a rate without a hearing, within 60 days of filing, consistent with the standards in C.S.G. Sec. 38a-665 pertaining to excessive, inadequate, or unfairly discriminatory rates.

· On average, the Department of Public Health receives 496 complaints and notifications of medical malpractice payments involving doctors per year.

· About half (243) of those complaints and notifications result in an investigation, and 45 investigations (18 percent of the investigations or 9 percent of the total complaints) result in a disciplinary action.

· About 8 cases, on average (17 percent of cases with an action or 2 percent of total complaints), end in a severe disciplinary action (i.e., loss of license).

· Over the last 6 years, the proportion of cases investigated by DPH as a result of a review of malpractice payments has dropped in half (from 30 percent to 16 percent).

· Relatively few doctors with multiple licensure actions remain in practice; however, physicians with multiple medical malpractice payments tend not to have licensure actions taken against them.

· The physician disciplinary system is primarily complaint driven - depending mostly on public complaints. The process can be fairly characterized as largely reactive, not proactive. Public protection could be enhanced if the department proactively identified physicians who lack the requisite skills and qualities to effectively perform their jobs.

· The Department of Public Health does not maintain any formal initial screening guidelines for determining which complaints are to be investigated. This is the point at which the majority of cases are selected out of the process.

· No budget is provided, and rarely is a consultant paid, to determine if standards of care have been violated. Standard of care determination is an essential component of a case involving incompetence or negligence.

· There are no formal disciplinary guidelines to assist the department in its negotiations with a licensee or the Board of Medical Examiners in its decision-making process. The purpose of guidelines is to provide consistent and equitable discipline in cases dealing with similar violations.

· The department does not typically find out about a malpractice issue that has been litigated or a malpractice case that has been settled until a payment has been made. That time period is on average at least five years from the date of the incident, and in many cases even longer.

· Committee staff were told that doctors employed by hospitals are often initially named in lawsuits and involved in a pending malpractice matter but are eventually dropped from suits as a case proceeds. Hospitals make a payment on behalf of a doctor's negligent actions but the payment is made under the aegis of the hospital. The identity of the doctor is masked and the payment is never reported to the state or the National Practitioner Data Bank (NPDB.)

· Several victims and families of patients who have alleged medical malpractice and have petitioned DPH have cited a lack of communication with the department over the progress and status of a pending case before DPH.

· Department disciplinary and medical malpractice payment data are not crosschecked with the NPDB for consistency or completeness.

· The Department Of Public Health does not know how many doctors are actually involved in patient care, the actual number of doctors practicing under each specialty in patient care, or the trends in physician employment in Connecticut.

· High quality health care requires physicians to be adequately trained so that care will be delivered consistent with current professional knowledge and practice. If physicians are not well-versed in the standard of care, medical errors are more likely. Connecticut is one of only 10 states that do not require continuing professional medical education for physicians, according to the American Medical Society.

_ shall develop formal written initial screening guidelines for physician-related complaints, including medical malpractice payment notifications. The department shall develop and report meaningful reasons for why cases are dropped from the process in a summary format in the department's annual report entitled, Report of Legal Office Regarding Physician Actions required under C.G.S. Sec 20-13i;

_ shall develop a formal written prioritization system so investigations may be conducted in order of priority, and report outcome and timeliness of actions by priority under C.G.S. Sec. 20-13i;

_ shall adopt written guidelines for broadening the scope of investigations, if deemed appropriate following screening, beyond the incident report or complaint that prompted the investigation. Those criteria for investigatory practices should include: sampling a large portion of patient records to identify patterns of care; reviewing office practices and procedures; reviewing performance and discharge data from hospitals, and managed care organizations; and interviewing additional patients and peers;

_ shall adopt necessary procedures so that all investigations recommended for closure by the department, without any action, shall be reviewed by a panel of both public and professional members of the Medical Examining Board for concurrence;

_ shall develop a proactive system of markers to identify licensees warranting possible evaluation, in order to provide greater public accountability. This shall include but not be limited to: health status/age of licensee; number of complaints and malpractice claims/settlements/judgments; frequent changes in location; changes in area of practice; adverse actions by professional organizations, HMOs and licensing boards; failure to recertify in board specialty; inability to obtain liability insurance in the regular insurance market; and physicians whose practice is not subject to peer review. It is understood any one action in one of these areas would not necessarily warrant an evaluation by DPH; and

_ shall implement these changes by December 31, 2004.

_ identification of each type of violation;

_ a minimum and maximum penalty for each type of violation;

_ additional optional conditions that may be imposed by the board for each violation; and

_ identification of factors the board shall consider in determining if the maximum or minimum penalty should apply.

_ if a periodic test for re-licensing based on determining an acceptable level of clinical competence, both knowledge and skills, would benefit public safety and health;

_ the appropriateness of such a test for all physicians or class of specialties;

_ how such a test would be administered;

_ at what time intervals in a physician's career should such a test be administered;

_ what type of preparation would be necessary and could be made available to physicians;

_ how failure of the test should be handled, and how many retakes would be allowed; and

_ how much such a re-licensing process would cost.

· Premiums paid by physicians for medical malpractice coverage in Connecticut have increased recently, but the extent of increase varies by specialty and insurer.

· After a drop in 1998, total premiums earned by medical malpractice carriers in Connecticut increased 54 percent from 1998 to 2002. Nationally, the increase in earned premium was 25 percent over the same time period.

· Insurance carrier losses for medical malpractice in Connecticut have increased more than the national experience. Nationally, over the last 12 years, incurred losses increased on an inflation-adjusted basis 97 percent, but the increase was over 340 percent in Connecticut.

· Frequency, or the number, of medical malpractice claims has been fairly constant in Connecticut.

· In Connecticut, the average "severity" of claims, measured as the dollar amount per claim, has increased 115 percent on an inflation-adjusted basis since 1991.

· Medical malpractice carriers have allocated the majority of invested assets to bonds. Investment income has declined, but this decline has been relatively minimal.

· The cost of reinsurance, additional coverage that insurance companies buy to protect themselves from excessive losses, has increased.

· Excess reserves have helped keep premium rates low in the past but insurers report the excess has been depleted.

· Profitability in the medical malpractice insurance line has declined in Connecticut more than the national experience and more than all insurance lines as a whole.