Topic:
LEGISLATION; LIABILITY (LAW); MEDICAL MALPRACTICE INSURANCE; STATISTICAL INFORMATION;
Location:
INSURANCE - MALPRACTICE;

OLR Research Report


October 31, 2008

 

2008-R-0429

MEDICAL MALPRACTICE INSURANCE CLOSED CLAIM REPORTS

By: Janet L. Kaminski Leduc, Senior Legislative Attorney

You asked for information on the state mandated medical malpractice insurance closed claim reporting.

SUMMARY

Since January 1, 2006, commercial insurers, captive insurers, and self-insured entities that issue professional liability (i.e., medical malpractice) insurance to physicians, surgeons, hospitals, advanced practice registered nurses, or physician assistants must provide data on closed claims to the insurance commissioner quarterly. Since October 1, 2007, those that issue it to medical professionals and hospitals must provide the data (PA 05-275, as amended by PA 07-25).

A “medical professional” is any person licensed or certified to provide health care services to individuals, including chiropractors, clinical dietitians, clinical psychologists, dentists, nurses, occupational speech and physical therapists, optometrists, pharmacists, physicians, podiatrists, and psychiatric social workers.

The commissioner must submit a report to the Insurance and Real Estate Committee annually by March 15 that includes (1) an analysis of the closed claim data and (2) information on medical malpractice insurance rate filings approved in the prior calendar year and base premiums insurers charge by medical specialty.

The commissioner has issued two annual summary reports to date. The 2007 report analyzes data on medical malpractice claims closed in the fourth quarter of 2005 and calendar year 2006. The 2008 report adds closed claim data for calendar year 2007 to the analysis. The reports are enclosed and available on the department's web site at http://www.ct.gov/cid/cwp/view.asp?Q=390172&cidNav=|48775|.

Overall, fewer claims were reported closed in 2007 than in 2006, the average payment per claim in 2007 was lower than in 2006, and average legal defense costs were higher in 2007 than in 2006. Also, claim payments and defense costs were higher for commercial insurers than for captives and self-insurers. Among his findings, the commissioner observed that (1) 2007 premium rates were down slightly from 2006 and (2) captives and self-insurers combined wrote slightly more business than commercial insurers.

The commissioner also noted that although there are “nine quarters of claim data, the overall statistical credibility of the data is somewhat limited and therefore, caution should be exercised in drawing any definitive conclusions at this time. Subsequent annual reports will continue to add data, eventually allowing trends to emerge and the opportunity for additional detail in the analysis.”

KEY FINDINGS

We are providing a summary of some of the key findings from the department's 2008 report. If you would like additional information, please let us know.

Total Closed Claims and Indemnity Payments

The insurance commissioner received information on 1,506 closed claims for the nine calendar quarters covered in the 2008 report, made up of 805 from commercial insurers and 701 from captives and self-insurers. More than half (55% or 822) of the reported claims were resolved in favor of the defendant with no indemnity payment. “Indemnity payment” is total compensation paid to a claimant or plaintiff.

The remaining 45% (or 684) of the reported claims were resolved in favor of the claimant or plaintiff with total indemnity payments of $458.6 million, an average of about $670,000 per claim. Commercial insurers

made indemnity payments on 42% of closed claims paying $273.8 million total or an average of about $801,000 per claim. Captives and self-insured entities made indemnity payments on 49% of closed claims paying $184.8 million total or an average of about $540,000 per claim.

Table 1 shows number of total closed claims and indemnity payment data by reporting period.

Table 1: Closed Claims and Indemnity Payments (2005 4th Q – 2007)

Year

Total Number of Closed Claims

Number (%) of Closed Claims with Indemnity Payment

Number (%) of Closed Claims without Indemnity Payment

Total Indemnity Payments

Average Indemnity Payment

All Insurers and Entities

20051

206

105 (51%)

101 (49%)

$60,079,766

$572,188

2006

712

315 (44%)

397 (56%)

$229,547,071

$728,721

2007

588

264 (45%)

324 (55%)

$168,964,554

$640,017

Total

1,506

684 (45%)

822 (55%)

$458,591,391

$670,455

Commercial Insurers

20051

105

48 (46%)

57 (54%)

$37,734,786

$786,141

2006

368

162 (44%)

206 (56%)

$140,088,394

$864,743

2007

332

132 (40%)

200 (60%)

$95,993,016

$727,220

Total

805

342 (42%)

463 (58%)

$273,816,196

$800,632

Captive Insurers and Self-Insuring Entities

20051

101

57 (56%)

44 (44%)

$22,344,980

$392,017

2006

344

153 (44%)

191 (56%)

$89,458,677

$584,697

2007

256

132 (52%)

124 (48%)

$72,971,538

$552,815

Total

701

342 (49%)

359 (51%)

$184,775,195

$540,278

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

1 2005 data is for the fourth quarter only.

Size of Indemnity Payments per Claim

Of the 684 claims with indemnity payments, 281 (41.1%) had a payment of less than $100,000 and an average payment of about $39,000. These 281 claims accounted for about $11 million (2.4%) of the total indemnity payments made for all reported closed claims.

At the other end of the spectrum, 100 (14.6%) claims had payments of $1 million or more each and an average payment of about $3 million. These 100 claims make up about $309 million (67%) of the total indemnity payments made for all reported closed claims.

Table 2 shows the number of claims by size of indemnity payment. Figure 1 shows the information graphically.

Table 2: Size of Indemnity Payments (2005 4th Q – 2007)

Indemnity Payment

Number (%) of Claims with Indemnity Payments

Total (%) Indemnity Payments

Average Indemnity Payment

$1 - $99,999

281 (41.1%)

$10,922,842 (2.4%)

$38,871

$100,000 - $199,999

70 (10.2%)

$10,704,918 (2.3%)

$152,927

$200,000 - $299,999

45 (6.6%)

$11,463,291 (2.5%)

$254,740

$300,000 - $399,999

46 (6.7%)

$16,310,001 (3.6%)

$354,565

$400,000 - $499,999

36 (5.3%)

$16,780,917 (3.7%)

$466,137

$500,000 - $599,999

13 (1.9%)

$7,160,000 (1.6%)

$550,769

$600,000 - $699,999

17 (2.5%)

$11,059,923 (2.4%)

$650,584

$700,000 - $799,999

31 (4.5%)

$23,600,718 (5.1%)

$761,313

$800,000 - $899,999

19 (2.8%)

$16,197,500 (3.5%)

$852,500

$900,000 - $999,999

26 (3.8%)

$25,599,184 (5.6%)

$984,584

$1,000,000 and over

100 (14.6%)

$308,792,097 (67.3%)

$3,087,921

Total

684 (100%)

$458,591,391

$670,455

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Figure 1: Number of Claims by Indemnity Payment Size (2005 4th Q – 2007)

Indemnity Payments by Type of Medical Provider

Of the 684 claims with indemnity payments, 341 (50%) were for “Hospitals – General,” 121 (18%) “Physicians – Others,” 57 (<1%) “Surgery,” and 52 (<1%) “Gynecology/OB-GYN.”

Table 3 shows a breakdown of closed claims and indemnity payments by the type of medical provider.

Table 3: Indemnity Payments by Type of Medical Provider (2005 4th Q – 2007)

Medical Provider

Number of Claims with Indemnity Payments

Total Indemnity Payments

Average Indemnity Payment

Hospital – General

341

$247,760,895

$726,572

Physician – Others

121

$53,220,542

$439,839

Surgery

57

$34,444,768

$604,294

Gynecology/OB-GYN

52

$55,424,290

$1,065,852

Dentist/Dental Hygienist

36

$2,676,314

$74,342

Physician – Family/Pediatric/General Practice

22

$15,063,750

$684,716

Anesthesiologist

9

$15,200,000

$1,688,889

Hospital – Children's

8

$10,492,500

$1,311,563

Other Corporate Group Practice

7

$12,191,666

$1,741,667

Emergency Services

7

$6,549,500

$935,643

Hospital – Others

7

$1,536,000

$219,429

Nurses: APRN/RN

5

$2,530,000

$506,000

Freestanding Surgical Center/Rehab Hospital

3

$380,000

$126,667

Others

3

$12,000

$4,000

Clinical Psychologists

2

$404,166

$202,083

Occupational Medicine/Physical Therapists

2

$270,000

$135,000

Medical Group

1

$425,000

$425,000

Assisted Living Facilities

1

$10,000

$10,000

Total

684

$458,591,391

$670,455

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Indemnity Payments by Severity of Injury

The 684 claims with indemnity payments had an average indemnity payment of $670,455. Of those, 179 (26%) claims resulted from the patient's death. These 179 claims had total indemnity payments of about $145 million (32% of all indemnity payments made for all closed claims) and an average indemnity payment of $812,527.

Another 77 (11%) claims were due to a “major permanent” or “grave permanent” injury, including quadriplegia and brain damage requiring lifelong dependent care. These 77 claims had total indemnity payments of about $183 million (40% of all indemnity payments made for all closed claims) and an average indemnity payment of $2,377,105.

Table 4 shows the number of claims with indemnity payments and the amount of indemnity payments by severity of injury. Figure 2 shows the average indemnity payment by severity of injury.

Table 4: Number and Amount of Indemnity Payments by Severity of Injury (2005 4th Q – 2007)

Severity of Injury

Number (%) of Claims with Indemnity Payments

Total Indemnity Payments

Average Indemnity Payment

Emotional only

24 (3.5%)

$6,468,036

$269,502

Insignificant temporary

52 (7.6%)

$1,060,803

$20,400

Minor Temporary

106 (15.5%)

$9,266,990

$87,424

Major Temporary

76 (11.1%)

$43,963,337

$578,465

Minor Permanent

85 (12.4%)

$17,286,995

$203,376

Significant Permanent

85 (12.4%)

$52,065,811

$612,539

Major Permanent

47 (6.9%)

$113,629,201

$2,417,643

Grave Permanent

30 (4.4%)

$69,407,882

$2,313,596

Death

179 (26.2%)

$145,442,336

$812,527

Total

684 (100%)

$458,591,391

$670,455

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Figure 2: Average Indemnity Payment by Severity of Injury (2005 4th Q – 2007)

Economic and Noneconomic Damages

The law requires a reporting entity to report the amount of economic and noneconomic damages paid for each closed claim or an estimate of these amounts in the case of a settlement. However, for 371 (54%) of the 684 closed claims with an indemnity payment, reporting entities provided neither a breakdown between economic and noneconomic damages nor an estimate.

“Economic damages” means compensation for financial losses, including the cost of reasonable and necessary medical care, rehabilitative services, custodial care, and loss of earnings or earning capacity. “Noneconomic damages” means compensation for all non-financial losses, including (a) physical pain and suffering and (b) mental and emotional suffering (CGS 52-572h).

Of the 313 claims for which a breakdown was given, 67% of the total amounts paid on the claims were designated for noneconomic damages. Specifically, the 313 closed claims resulted in total payments of about $210.4 million, of which $70.1 million was for economic damages and $140.3 million was for noneconomic damages.

Commercial insurers provided the breakdown for 62% of their closed claims and 67% of payments made on these claims were for noneconomic damages. Captives and self-insurers provided the breakdown on 30% of their closed claims and 64% of payments made on them were for noneconomic damages.

Table 5 shows the economic and noneconomic damages paid on the subset of claims for which the reporting entities provided it.

Table 5: Aggregate Economic and Noneconomic Damages Paid (2005 4th Q – 2007)

Year

Total Number of Closed Claims2

Total Indemnity Payments

Economic Damages

Noneconomic Damages

All Insurers and Entities

20051

32

$5,341,400

$743,570

$4,597,830

2006

163

$117,268,293

$32,575,535

$84,692,758

2007

118

$87,781,364

$36,801,975

$50,979,389

Total

313

$210,391,057

$70,121,080 (33%)

$140,269,977 (67%)

Commercial Insurers

20051

19

$4,341,000

$738,570

$3,602,430

2006

108

$94,225,660

$28,156,882

$66,068,778

2007

84

$67,298,850

$25,411,741

$41,887,109

Total

211

$165,865,510

$54,307,193 (33%)

$111,558,317 (67%)

Captive Insurers and Self-Insuring Entities

20051

13

$1,000,400

$5,000

$995,400

2006

55

$23,042,633

$4,418,653

$18,623,980

2007

34

$20,482,514

$11,390,234

$9,092,280

Total

102

$44,525,547

$15,813,887 (36%)

$28,711,660 (64%)

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

1 2005 data is for the fourth quarter only.

2 Includes only those claims for which the reporting entity broke out economic and noneconomic damages.

Legal Defense Costs

Of the total 1,506 closed claims reported, 1,232 (82%) generated about $60.3 million in defense counsel payments, an average of $48,944. Of those, 659 (53%) had no indemnity payment and average defense payment of $33,894. When there was an indemnity payment, average defense payment was $66,253. Average defense costs increased from $44,941 for claims closed in 2006 to $55,679 for claims closed in 2007.

Table 6 shows defense counsel payments by indemnity payment size. Table 7 shows them by injury severity when there was indemnity paid.

Table 6: Payment to Defense Counsel by Indemnity Payment Size (2005 4th Q – 2007)

Indemnity Payment

Number of Closed Claims

Number of Closed Claims with Payments to Defense Counsel

Total Payments to Defense Counsel

Average Payment to Defense Counsel

$0

822

659

$22,336,120

$33,894

$1 - $99,999

281

193

$6,743,888

$34,942

$100,000 - $199,999

70

65

$3,933,583

$60,517

$200,000 - $299,999

45

41

$1,947,583

$47,502

$300,000 - $399,999

46

42

$2,271,136

$54,075

$400,000 - $499,999

36

34

$1,750,498

$51,485

$500,000 - $599,999

13

13

$894,359

$68,797

$600,000 - $699,999

17

16

$1,517,702

$94,856

$700,000 - $799,999

31

30

$2,442,749

$81,425

$800,000 - $899,999

19

19

$1,361,203

$71,642

$900,000 - $999,999

26

26

$2,094,155

$80,544

$1,000,000 and over

100

94

$13,006,147

$138,363

Total

1,506

1,232

$60,299,125

$48,944

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Table 7: Defense Counsel Payment by Severity of Injury (2005 4th Q – 2007)

Severity of Injury

Closed Claims with Indemnity Payments

Closed Claims with Indemnity and Defense Counsel Payments

Total Payments to Defense Counsel

Average Payment to Defense Counsel

Emotional only

24

17

$382,989

$22,529

Insignificant temporary

52

34

$651,741

$19,169

Minor Temporary

106

74

$3,333,761

$45,051

Major Temporary

76

55

$2,778,548

$50,519

Minor Permanent

85

77

$3,801,737

$49,373

Significant Permanent

85

80

$4,955,424

$61,943

Major Permanent

47

44

$5,189,768

$117,949

Grave Permanent

30

27

$2,920,074

$108,151

Death

179

165

$13,948,963

$84,539

Total

684

573

$37,963,005

$66,253

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Claim Process and Disposition

The vast majority, 1,405 (93%), of the 1,506 closed claims settled and 1,369 (91%) settled before litigation or trial began. Less than 1% (101) of the claims resulted in a court disposition: 17 (17%) for the plaintiff and 84 (83%) for the defendant.

Medical Malpractice Insurance Premiums by Medical Provider

Table 8 shows commercial insurers' 2007 base premiums by medical provider. “Base premiums” are the manual premiums before applying increased limits factors (i.e., the additional premium charged when a health care provider wishes to purchase higher limits of coverage) and any experience debits and credits and, thus, do not necessarily represent the actual amount a provider paid for insurance. The department noted that commercial premiums in 2007 were down slightly from 2006.

Base premiums are not available from captive insurers and self-insurers (their rating methodology is different from that of commercial insurers and does not develop base rates by specialty).

Table 8: Commercial Insurers' Base Premiums by Type of Medical Provider (2007)

Medical Providers

Number of Medical Providers Insured by Commercial Insurers in 2007

Total Base Premiums

Average Commercial Insurer Base Premium for Medical Provider

Anesthesiologist

21

$3,999,429

$190,449

Assisted Living Facilities

53

$2,182,362

$41,177

Clinical Psychologists

36

$449,903

$12,497

Dentist/Dental Hygienist

2,041

$5,410,605

$2,651

Emergency Services

55

$757,185

$13,767

Freestanding Surgical Center/Rehab Hospital

31

$456,082

$14,712

Gynecology/OB-GYN

102

$8,010,948

$78,539

Hospital – Children's

1

$79,559

$79,559

Hospital – General

22

$9,395,973

$427,090

Hospital – Other

9

$10,039

$1,115

Nurses: APRN/RN

2,311

$1,068,009

$462

Occupational Medicine/Physical Therapists

389

$188,544

$485

Other Corporate Group Practice

312

$106,731

$342

Physician – Family/Pediatric/General Practice

897

$11,312,901

$12,612

Physicians – Other

3,436

$40,644,938

$11,829

Surgery

247

$10,407,658

$42,136

Others

2

$3,697

$1,849

Total

9,965

$94,484,563

$9,482

Source: Connecticut Insurance Department, Connecticut Medical Malpractice Annual Report, March 2008

Rate Filings

The department did not receive any rate filings in 2006 for medical malpractice insurance for physicians, surgeons, hospitals, advanced practice registered nurses, or physician assistants. It received and approved three in 2007:

1. Medical Protective Company, a 24.2% rate decrease effective August 1, 2007;

2. Professional Liability Insurance Company of America, initial rates effective September 1, 2007; and

3. The Doctor's Company, a 7.1% rate increase effective August 1, 2007 for new business and October 1, 2007 for renewal business.

CLOSED CLAIM REPORTING REQUIREMENTS

Section 14 of PA 05-275 (CGS 38a-395) required each commercial insurer, captive insurer, and self-insured entity that issues professional liability (i.e., medical malpractice) insurance to physicians, surgeons, hospitals, advanced practice registered nurses, or physician assistants to provide closed claim data to the insurance commissioner quarterly. It required the commissioner to establish a closed claim reports electronic database that is available to the public.

Effective October 1, 2007, PA 07-25 extended the closed claim report requirement to insurers that issue medical malpractice insurance policies to medical professionals or hospitals. It defines “medical professional” as any person licensed or certified to provide health care services to individuals, including chiropractors, clinical dietitians, clinical psychologists, dentists, nurses, occupational speech and physical therapists, optometrists, pharmacists, physicians, podiatrists, and psychiatric social workers.

A “claim” is a request for indemnification that a physician, surgeon, hospital, advanced practice registered nurse, or physician assistant files with an insurer under a medical malpractice insurance policy for a loss for which the insurer has established a reserve. A “closed claim” is one that has been settled or disposed of (e.g., the insurer has paid).

Insurers must submit a report within 10 days after the end of the last day of the calendar quarter in which a claim is closed. The report must only include information about claims settled under Connecticut's laws. It must provide details about the insured and insurer; the injury or loss giving rise to the claim; the claim's process; and the amount paid, if any, on the claim.

Insured and Insurer

The report must include the:

1. insurer's name;

2. policy limits and whether it was an occurrence policy or was issued on a claims-made basis;

3. insured's name, address, license number, and specialty coverage; and

4. insured's policy number and unique claim number.

An “occurrence policy” provides protection for malpractice that occurred during the time the policy was in effect. A “claims-made” policy provides protection for claims made during the period the policy is in effect.

Injury or Loss

The report must specify the:

1. date of the injury or loss that was the basis of the claim;

2. date the injury or loss was reported to the insurer;

3. name of the institution or location where the injury or loss occurred;

4. type of injury or loss, including an injury severity rating that corresponds with the injury scale that the commissioner must establish based on the severity scale developed by the National Association of Insurance Commissioners; and

5. name, age, and gender of any injured person covered by the claim.

Any individually identifiable health information (as defined by federal privacy laws, including the Health Insurance Portability and Accountability Act (HIPAA)) is confidential. If necessary to comply with federal privacy laws, the insured must arrange with the insurer to release the required information.

Claim Process

The report must contain details about each closed claim's “process” including:

1. whether a lawsuit was filed, and if so, in which court;

2. its outcome;

3. the number of other defendants, if any;

4. the stage in the process when the claim was closed;

5. the trial dates, if any;

6. the date of any judgment or settlement, if any;

7. whether an appeal was filed and, if so, the date filed;

8. the appeal resolution and the date it was decided;

9. the date the claim was closed; and

10. the initial and final indemnity and expense reserve for the claim.

Amount Paid on the Claim

The report must include for each closed claim the:

1. total amount of the initial judgment a jury rendered or the court awarded;

2. total amount of the settlement if (a) no judgment was rendered or awarded or (b) the claim was settled after judgment was rendered or awarded;

3. amount of economic and noneconomic damages, or the insurer's estimate of these amounts in a settlement;

4. amount of any interest awarded due to failure to accept an offer of judgment or compromise;

5. amount of any reduction or addition and the amount of final judgment after such reductions or additions;

6. amount the insurer paid;

7. amount the defendant paid due to a deductible or a judgment or settlement in excess of policy limits;

8. amount other insurers or defendants paid and whether a structured settlement was used;

9. expense assigned to and recorded with the claim, including defense and investigation costs but not including the actual claim payment; and

10. other information the commissioner determines necessary to regulate the medical malpractice insurance industry for the identified specialties, ensure its solvency, and ensure that such insurance is available and affordable.

Insurance Commissioner's Annual Report

The insurance commissioner must aggregate the insurers' closed claim reports data into an annual summary report. The report must provide an analysis of the closed claim information, including:

1. a minimum of five years of comparative data, when available;

2. trends in frequency and severity of claims;

3. itemization of damages;

4. timeliness of the claims process; and

5. any other descriptive or analytical information that would help interpret trends in the closed claims.

The annual report also must summarize rate filings for medical malpractice insurance for the identified medical specialties that the department approved for the prior calendar year. The summary must include an analysis of the trend of direct losses, incurred losses, earned

premiums, and investment income as compared to prior years. The report must also include base premiums insurers charge for each specialty and the number of providers insured by specialty for each insurer.

Beginning March 15, 2007, the commissioner must annually submit the report to the Insurance and Real Estate Committee. He must also make the report available to the public, post it on the department's Internet site, and provide public access to the contents of the electronic database after names and other individually identifiable information about claimants and practitioners have been removed.

The commissioner must provide the public health commissioner with electronic access to all the closed case information he receives. The public health commissioner must keep the information as confidential as the law requires the insurance commissioner to do. (An insurer's individual closed claim data reported to the insurance commissioner is kept confidential and not subject to public record requests.)

JLK:ts