Vested Interest - July 2004 Issue

The President’s Thoughts

Recently, a southern Illinois municipality was considering an ordinance to remedy rising medical malpractice insurance rates. When asked to respond to the efforts of the municipality, I encouraged them to thoroughly investigate the causes of the spike in rates and to take public testimony under oath as part of their inquiry.

The municipality should also review a financial analysis of malpractice insurers in the June 14, 2004 issue of Crain’s Chicago Business. Crain’s researched data from the Illinois Department of Insurance for the years 1985 through 2003 which revealed that ISMIE Mutual Insurance Company reported profits totaling $199 million. In 2003 alone, ISMIE reported a profit of $19 Million.

The huge disparity between premiums collected and claims paid in 2003 exceeds $150 million, according to a graph printed in the Crain’s article. It is the widest margin reported. Meanwhile, during the first nine years of the study, the average number of claims per doctor paid by ISMIE dropped 2.4 percent while the average amount paid per claim was flat.

The municipal fact finders also should read Bob Herbert’s column in The New York Times on June 25, 2004. Herbert cites data which dispels the notion that bad laws, bad lawyers and bad judges are causes of a malpractice insurance crisis. Though the AMA considers New Jersey and Missouri "crisis" states, due to out of control legal systems, studies show that malpractice claims and awards are not increasing in either state. Missouri’s Department of Insurance reported "medical malpractice claims, filed and paid, fell to all time lows in 2003, while insurers enjoyed a cash windfall."

Herbert also reported the facts in New Jersey. In response to a suit by The Bergen Record newspaper, lawyers for the medical society objected furiously to a judge’s order to release data revealing how much was paid out for malpractice claims. Interestingly, the data showed a 21 percent drop in malpractice payments from 2001 to 2003, while malpractice rates charged to doctors simultaneously skyrocketed.

According to Herbert’s article, the Congressional Budget Office reported that the investment income of insurance companies has decreased, causing "pressure" on insurance companies to increase premiums in the last few years.

The municipality should require insurance executives under oath to promise rate rollbacks in exchange for malpractice reform. They will refuse. The reason is too well known by the executives - - that recent spikes in insurance rates have not been caused by spikes in filings or payouts.

Bob Herbert put it succinctly "The disinformation campaign of the tort reform zealots, and their sustained attacks on the rights of patients who have been harmed by doctors is disgraceful. The proper prescription for this apparently chronic disorder is a strong dose of the truth."

The city in southern Illinois and people throughout the state should ask insurers if it is ethical to wrongfully blame victims and the justice system for the insurance funds weak investment results. What insurers call crisis management is more accurately called cash management.

State legislators should act to compel disclosure by insurance companies so that this ruse is not repeated.

Kevin J. Conway, President
Illinois Trial Lawyers Association