Liability Insurance

Let’s talk Liability. I know, I know, ughhhh! But truly, medical malpractice insurance serves a very particular purpose. It protects those of us in the field of medicine from losing everything due to a costly mistake, or maybe not…….I’ll get back to that. For perspective I will give you my specific costs. When I opened my practice (keep in mind I did do obstetrics) the medical liability Insurance company that I spoke to gave me the following quote, it will be 5K for the first year, then it will go up 5K a year for five years, after which it should level off. Huh? The explanation goes like this, in order to make a big enough mistake to get sued you have to actually see patients, the more you see, the greater your risk. So it makes sense that there should be an initial steep incline. Ok I said, can’t practice without it, well, in my state you can legally but you wont get hospital privileges, nor will any of the health insurance companies allow you to become a “preferred provider” whatever that means. So I did my projections and budget and was all set, by the way, my projections where so close to what I actually made in the second year it was scary, I was within $20!! But, then the dreaded third year began, anticipating my bill for 15K I opened the envelope only to find a bill for 22K!!!! What?! I called my broker who then reported that the state insurance commissioner had allowed a 17% increase in premiums. What? Why? Has there been a rash of malpractice suits with massive payoffs? ….no. So I proceeded to call and email and call the state insurance commissioner, funny I never did get an answer. At this point I had to take a loan to finance my liability insurance. Can you believe that? So now I was paying interest on this increase. Not long after this I closed my practice (four months to be exact).
I would like to break this down just a bit. First of all, let’s remember that insurance companies are publicly owned and traded, thus by law they are responsible to their stock holders, not their customers (I don’t think I will ever understand that). Next we need to remember that a major portion of their income is received via investments made with those premiums, rather than the premiums alone. So what is the cause of the cost and “Liability Insurance Crisis”? Depends on who you talk to, if you talk to Doctors you will here that we need “Tort Reform” because greedy lawyers and large payouts, I suppose if you talk to lawyers they will say careless doctors are the cause, and if you talk to economists the answer will be poor performing stocks. The economists will add, however that the price will continue to rise as long as the market can handle it, think of it, if you are selling widgets and you are charging three dollars, and raise the price to six and people keep buying it, why not go up. Free market should bring this down right? Maybe, if you raise your prices and increase your pay outs to stock holders, wont other insurance company stock holders be jealous, and raise their prices? It is a tedious balance to say the least. But let me tell you, as a Doctor we don’t shop around that often and we sign for a year at a time, so….they are pretty safe with my premiums for a year. One of the reasons we don’t shop around is a little thing called “tail”, what? Most of today’s medical liability insurance is a “claims made” policy, that is you are covered for claims made while the policy is in effect, when you are done or want to change policies you will have to buy tail coverage for anything that happens later, i.e. if I missed breast cancer during an annual exam, after which I cancelled my insurance, then three years later the patient finds out she has breast cancer and decides to sue me, even though I was covered when I examined her, I am not covered now, unless I bought “tail”, incidentally the bill for my tail coverage after a mere 2 ½ years of practice was $53,000.00!!!!!!!! This, among other things provides market stability, if you want to change insurance companies you better have a few bucks saved up. By the way, I didn’t buy the tail, so if a law suit comes up latter I can lose everything I have, kids college fund, house, car, etc. etc.
Now, let’s talk a little about Tort reform, this basically means let’s make laws that A. make it harder to sue, and B. decrease pay outs when a law suit does go through. Sounds like it will help right? Nope, In the states that have passed tort reform (NH, ME, TX, among others) there has been no change in premiums whatsoever. So why are docs screaming for tort reform? Look at the share holders, presidents, board of trustees and CEOs of many of these liability insurance companies, I looked at the top six, this group is filled with Doctors!!!!!!!!!!!! Talk about a conflict of interest. Tort reform is good for insurance company profits and bad for people wronged by the system (probably bad for trial lawyers as well).
Now back to my “mistake” here is how it actually works, medical malpractice law suits are decided by juries and usually it is an emotional decision (that is why obstetrics fares so poorly, “everybody deserves a healthy baby”) also based on “standard of care” not based on evidence or science. So as a professional I must make decisions with you in your best interest based on science, but if that is in conflict with “standard of care” I am at risk, and if it goes to court, at fault. Here is an example, all the current evidence reveals that the use of a PSA test (for prostate cancer) is a poor screening tool and not only does in not change outcome, it may actually cause harm, however, because it is standard of care, if I don’t order one, then you end up with prostate cancer, you can sue me and win!.
Finally, I would like to mention the disempowerment that having liability insurance creates. Not only do I have no control over the premiums, nor can I practice without it, but if I get sued they decide whether or not to actually fight the suit. So, if it is financially equitable to settle out of court, that is what they will do, without regard to my good name or reputation!!! I was going to quote some of their profits, investments, payouts etc, but this got long winded, and this info is available online, just google it and look for annual reports.