Birth Injury Compensation Fund

You asked several questions concerning medical malpractice awards in Connecticut and the operation of the Virginia Birth-Related Neurological Injury Compensation Program. Specifically, you asked:

1. How many awards or settlements were made against obstetricians and gynecologists (ob/gyns) in circumstances that would qualify for compensation under Virginia’s system and in what amounts?

2. How would adopting a system like Virginia’s affect Connecticut ob/gyn insurance premiums if there were no caps on liability?

3. Could ob/gyns repeatedly found at fault in deliveries be excluded from a no-fault system? Could they be sanctioned outside the tort system or the existing physician discipline process?

4. Do affected families fare better under a no-fault or tort system?

Over the past 10 years, 263 awards and settlements involving ob/gyns were made in Connecticut. But the data provided by the Department of Public Health (DPH) do not describe the details of these cases, consequently we cannot determine how many might have arisen from circumstances that would trigger compensation through a no-fault birth injury system.

Premium rates for Virginia ob/gyns fell after its legislature created a no-fault compensation system, and ob/gyns found greater access to malpractice liability insurance. (Comparable results were reported after Florida adopted a similar system in 1989. ) But, because Virginia also caps total malpractice awards and adopted other tort reforms, its rate reduction experience may not be applicable in Connecticut. The claim information and award data that would permit an estimate of a birth injury fund’s introduction in Connecticut is not available.

An ob/gyn who has settled multiple malpractice claims or been the subject of several jury awards could be barred from participating in a no-fault system. The legislature could create a special system to sanction such ob/gyns, but unless carefully designed it could have the same problems as the existing physician discipline process. As a condition of participating in its birth compensation program, Virginia doctors and hospitals must agree to be reviewed by the Board of Medicine or the Health Department, respectively, of any claim the program receives about them.

Virginia’s birth injury program serves more birth-injured children than the tort system and provides greater benefits for the typical child than allowed under the medical malpractice cap, according to a recent legislative report. But it does not permit mothers to receive compensation for injuries they incur during the birth (they can pursue a malpractice action in this event) and sometimes fails to meet the unique needs of individual children.

Virginia’s Birth-Related Neurological Injury Compensation program began operating in 1987. It provides a no-fault resolution to medical injuries that occur to a limited range of infants: those who (1) suffer severe neurological damage due to oxygen deprivation or mechanical injury to brain or spinal cord during the birth process and (2) were delivered by a participating ob/gyn (or nurse-midwife) or in a participating hospital. Families of such children waive their right to sue in return for lifetime compensation for medical and other costs from a special fund; those who do not meet both these criteria can pursue a malpractice claim. Compensation comes from a fund that is capitalized by payments from participating physicians and hospitals, other physicians, and liability insurers (see OLR Report 2003-R-0620 for more details).

Virginia caps total malpractice awards. The cap is currently $ 1. 7 million and is adjusted periodically for inflation. The presence of this cap makes it difficult to infer conclusions about the potential effect of implementing a similar no-fault system in Connecticut based on the Virginia experience.

Over the past 10 years, 263 awards and settlements were made in Connecticut involving ob/gyns. The data provided by the Department of Public Health do not describe the specific facts of the cases, consequently we cannot determine how many might have arisen from circumstances that might trigger compensation through a no-fault birth injury system. Nor do the data distinguish between awards and settlements. Table 1 shows the number of awards and settlements per year and their amounts. It shows that the number and total value of awards and settlements peaked in 1999, as did the number of payouts of $ 1 million or more. The average payout increased steadily during the period while the median payout has fluctuated.

Virginia. Liability insurance rates for Virginia ob/gyns fell soon after its legislature created a no-fault compensation system in 1987, and ob/gyns found greater access to malpractice liability insurance, according to a 2002 study by the Joint Legislative Audit and Review Commission (JLARC).

Adopting its no-fault system also resulted in better access for Virginia ob/gyns to malpractice insurance. Before the system was enacted, one major malpractice insurer had recently left the state and two others had stopped writing new policies for ob/gyns. Soon after the system was created, one of the major insurers lifted its moratorium on writing new policies for ob/gyns.

The JLARC report found that the birth injury program appeared to be a factor in reducing the number of malpractice claims against Virginia ob/gyns and hospitals thus reducing insurance companies’ exposure to losses. The program’s existence, along with other changes in tort law, made Virginia attractive to insurers, and many new insurers entered the insurance market in the 1990s as a result. Their entrance increased competition, resulting in reduced premiums for ob/gyns. The birth injury program’s specific role in the reduction of malpractice premiums cannot be isolated, JLARC notes, but given that it helped reduce claims losses, it reasonably can be considered one factor in encouraging insurers to bring their business to Virginia.

This situation resulted in lower rates for Virginia ob/gyns, according the JLARC. It compared rates charged by St. Paul, the largest malpractice insurer in the state, from the year after the birth injury system took effect until St. Paul withdrew nationally from the malpractice business in 2001. As Table 1 shows, its ob/gyn base rates dropped across all areas of the state during this period.

Virginia’s rates were lower than neighboring states, JLARC reported. Its staff compared the rates one national insurer charged in Virginia with rates it charged in other states. It found that Virginia’s average base premiums for ob/gyns in 1996 and 1997 were the 5th and 6th lowest average rates, respectively, for those states where the insurer had a market presence. Furthermore, the insurer’s average rate in Virginia in those years— $ 25,286— was substantially below its national average rates of $ 34,967 and $ 42,660. And even as premiums rose significantly in 2001 and 2002, JLARC found that increases were not as steep and premiums were still much lower in Virginia than other states.

In addition to lower rates, Virginia law requires malpractice insurers to give physicians who participate in the birth injury program a premium credit. These discounts, JLARC found, currently range between 5 and 16%, or $ 4,800 to $ 7,300 on average, depending on where a physician’s practice is located.

Florida. A survey of medical malpractice premiums conducted in the early 1990s revealed that the mean premium charged Florida ob/gyns declined from $ 106,000 in 1989 (the first full year of its birth-injury fund’s operation) to $ 78,000 in 1992. More recently, in 2001, the Florida House Committee on Health Promotion reported that one insurance company’s malpractice premiums for ob/gyns had dropped 27. 7% since 1989. It also noted that some medical malpractice insurers offer a discount on premiums for ob/gyns who obtain fund coverage.

Adopting a similar system in Connecticut might result in rate decreases as well, but because Virginia also has a malpractice liability cap, any potential reduction here cannot be calculated based on its experience.

We cannot estimate the potential change in Connecticut premiums because we do not have access to needed claim information and award data nor could we find the information from other sources. Insurance Department staff said they could not estimate the effects because of the same lack of data. The Connecticut Medical Insurance Company (CMIC) said it currently insured too few ob/gyns to provide a basis for an actuarial estimate. Chris Parker of CMIC’s risk management unit also reported three other reasons that would make such an estimate difficult.

1. The volatility of their liability insurance market, has led many ob/gyns to switch carriers several times within the past few years. A survey of multiple insurers would be needed to obtain the requisite data.

2. Claims data from captive insurers that cover hospitals in which birth injuries occur typically report payouts as a unified figure making it hard to identify the doctor involved.

Information in the National Practitioner Data Bank is categorized by allegation (e. g. , failure to perform a timely caesarian) rather than outcome (e. g. , oxygen deprivation), making it difficult to determine whether an incident would qualify for birth-injury fund compensation.

Parker believes that estimating a birth injury fund’s potential effect on malpractice premiums would require a thorough review of cases involving ob/gyns.

A doctor who has settled repeated malpractice claims or who was the subject of multiple jury awards could be barred from participating in a no-fault system. But since the system itself does not find fault, it would be difficult to justify barring a doctor from the program after it finds an infant he or she delivered eligible for compensation, although such doctors could be asked to pay a higher participation fee.

A separate disciplinary system could be established just for obstetricians in which an expert panel would review claims against them to determine whether they failed to follow prescribed standards of care. Such a system, which would parallel the existing physician discipline system, could be authorized to take various disciplinary actions, including requiring an obstetrician to make restitution to a birth-injury compensation fund. But it might be difficult to find experts willing to serve on the panel, and care would need to be taken to make sure that this system does not duplicate procedures that many critics believe make the existing physician discipline system ineffective.

As a condition of participating in its birth injury compensation program, Virginia law requires doctors and hospitals to agree to submit to review by the Board of Medicine or the Department of Health (DH), respectively. The law requires the Workers Compensation Commission (which administers the program and determines whether an infant is eligible) to send a copy of any claim it receives to the board or department as appropriate. It requires the board or department to investigate the claim and take disciplinary action, if appropriate. If the board issues an order to physician as a result, it must send a copy to the claimant.

But JLARC staff reviewed the Board of Medicine and DH records pertaining to birth injury petitions and found that they conducted only minimal investigations of the circumstances surrounding the birth events. In the vast majority of cases, the agencies read the petitions but conducted no further investigation. This situation may result in part from (1) the board’s high threshold for taking action—it must determine that a physician’s actions are grossly negligent or a danger to the health and welfare of his patients and (2) its need to find that these actions are part of a pattern (although it does not consult previously closed cases).

JLARC recommended that the board and DH should (1) instead of relying solely on medical records, routinely interview claimant parents about the birth process and (2) notify each claimant family of the outcome of their reviews.

Overall, JLARC determined that the birth injury program’s benefits helped birth-injured children more than medical malpractice awards. It found the program serves more birth-injured children than the tort system and provides greater benefits for the typical child than allowed under the medical malpractice cap. But the program (1) does not permit mothers to receive compensation for their injuries a physician causes during the birth and (2) sometimes fails to meet the unique needs of individual children.

JLARC staff asked 50 families in the program whether they believed their child’s birth injury was a result of medical malpractice and, if so, whether they met with an attorney concerning a malpractice suit. Fewer than 25% either did not think or know medical malpractice was involved, while 17% of those who thought malpractice caused their child’s injury never spoke to an attorney. Thus, about 40% of families would likely not have been served at all by the tort system. Even if all of the remaining 30 families sued and 75% were successful, JLARC concluded that most families (27 out of 50) would likely not have been compensated under the tort system.

Virginia’s current cap on medical malpractice awards is $ 1. 7 million. The average cost of care for birth-injured children in the program is $ 1. 74 million in 2002 dollars (after all other sources of payments have been used), according to JLARC, while the actual expected lifetime program expenditure for a child born in 2001 who enters the program averages $ 4. 4 million. Even if a child received the maximum award and the money was wisely invested, JLARC determined it would not cover care costs, particularly after attorneys’ fees were paid. Further, JLARC found few plaintiffs receive maximum compensation. And, based on its

review of obstetrics-related malpractice payments reported to the National Practitioner Data Bank, only 5% (three) of the 62 awards entered between 1998 and 2002 approached the malpractice cap.

JLARC surveyed parents’ opinions of the program. It found that 70% would have chosen the program over a malpractice suit, principally because the cap would not cover their child’s expenses. It also found that the program’s administration was not unduly burdensome and that its eligibility determination process, which took less than three months on average, was much faster than the tort process.

But JLARC found that the tort system had some advantages over the no-fault program. For example, it compensates mothers who are injured during birth. Families who win a medical malpractice award may receive some satisfaction that negligent physicians are being held accountable. Finally, while parents do not have complete discretion over a medical malpractice award, the use of those funds is more flexible than that of program funds and may be spent in ways that better meet the specific needs of a particular child.


February 13, 2004		2004-R-0135
BIRTH INJURY COMPENSATION FUNDS

By: Saul Spigel, Chief Analyst

*Year*	*No.*	*Total $*	*High*	*Low*	*Average*	*Median*	*No. of $ 1 million or more*
1994	22	$ 5,907,402	$ 1,500,000	$ 5,000	$ 268,518	$ 137,500	1
1995	26	6,799,700	990,000	15,000	261,527	110,000	0
1996	20	6,153,593	925,000	15,000	307,680	210,000	0
1997	16	8,249,847	1,583,333	8,333	515,615	325,000	4
1998	38	20,524,894	3,000,000	894	540,129	212,500	9
1999	53	27,029,999	3,500,000	2,000	510,000	250,000	9
2000	27	11,970,000	2,450,000	30,000	443,333	250,000	5
2001	27	16,809,878	3,800,000	18,848	622,588	362,500	7
2002	18	10,436,900	3,750,000	4,500	579,828	150,000	3
2003	16	5,292,500	1,000,000	20,000	330,781	237,500	2

*Year*	*Northern*	*Tidewater*	*Richmond*	*Rest of State*
1988	$ 46,500	$ 43,100	$ 34,500	$ 29,400
1998	32,900	30,500	24,300	20,800
2001	40,000	36,700	31,900	28,700