We Need Insurance Reform to Protect Consumers

Abstract

THE INSURANCE INDUSTRY says Americans should blame lawsuits by injured patients for high medical malpractice insurance premiums. Too many people buy that line, but as a society we cannot let the insurance industry control the debate over insurance rates. We do not let the tobacco industry control the public policy agenda when it comes to cigarettes; the same principle applies here. The truth as I see it is that the insurance industry is responsible for today's medical liability crisis. Insurance companies saw their profits start to decline with the stock market in 2001 and in response apparently raised rates to make up for their investment losses. It is no coincidence that rates skyrocket when the economy suffers. Doctors are not alone in their distress. Insurance companies take advantage of other customers: homeowners, drivers, small businesses, and lawyers. Even consumers in other countries face huge price hikes from American insurance companies, regardless of that country's legal system. This practice of dramatically increasing premiums is happening in Australia, New Zealand, Canada, Great Britain, Germany, and elsewhere. Tort reform is a phony solution: limits on legitimate lawsuits will not bring down insurance rates for doctors. An analysis done by two separate insurance companies in 1986 after Florida adopted limits on lawsuits concluded that these so-called reforms would not lower costs (Aetna 1986; St. Paul 1986). Last year in Nevada the insurance industry and organized medicine pressured the legislature into passing a $350,000 cap on damages this summer. A few weeks later, two major insurance companies announced that they would not lower rates for doctors. Look at the winners and losers. Doctors lose because their rates continue to increase dramatically. Patients lose if their doctor cannot afford to stay in business. Innocent malpractice victims lose because they are left to pay for their own injuries. And taxpayers lose when these injured patients turn to the government for help. Who wins? Only the insurance industry. A recent study conducted by Americans for Insurance Reform (2003), a coalition of nearly 100 consumer and public interest groups, and written by a former insurance commissioner of Texas found two important facts about the claims made by the insurance industry. First, there has been no explosion in medical malpractice payouts in the last 30 years. Payments in constant dollars have been extremely stable and virtually flat since the mid-1980s. Second, insurance premiums in the last 30 years have tracked the economy-not payouts in malpractice cases. When the economy is strong, insurance companies make a lot of money in the markets, and they reduce premiums. The opposite happens when the economy is bad. That is the situation we are in today. Another study done in 1986 by the National Association of Attorneys General (Bellotti 1986) reflected the same rhetoric as is heard today: Lawsuits are out of control. …