If the recent crisis over malpractice (or, more precisely, professional liability) insurance seems vaguely familiar, it is because the crisis is not new. Rather, this year's round of premium rate increases, hospital service curtailments and physician anguish is only the latest struggle of a protracted war between the insurance industry and the segment of the legal community once known as trial lawyers but now self-named as the plaintiffs' bar.
As in previous years, the victims are patients, who have virtually no control over the events that affect their ability to obtain medical services, and health care professionals, who must either find the means to absorb ever-larger premiums for their liability insurance or seek other careers.
According to the American Hospital Association (AHA), physicians' premiums have increased as much as 81% in Pennsylvania, 67% in West Virginia, 58% in Indiana and Montana, and 57% in Texas. The U.S. Department of Health and Human Services (HHS) reported that premiums increased as much as 113% in Virginia and 112% in Arkansas this year.
Even more devastating, however, has been an exodus of carriers from the professional liability marketplace, making it difficult for physicians and hospitals to find coverage at any price. The St. Paul Group of Companies, with a 9% share of the market, announced last year that it intended to stop writing malpractice insurance. A spokesperson told the trade magazine Insurance Journal that St. Paul had lost nearly $1.5 billion on professional liability in the preceding four years.
Other companies were overexposed in professional liability, and several of them were forced into insolvency. Physicians Insurance Company and PHICO in Pennsylvania, PIE in Ohio, and Frontier Insurance in New York were taken over by regulators. Another insurance company, MIIX, withdrew from 11 states to concentrate on its home market of New Jersey, and SCPIE Holdings dropped out of the malpractice market in Texas and Florida to concentrate on its home market in California. Other carriers have been downgraded by ratings agencies--usually a sign of financial weakness--or have followed St. Paul's lead and left the market.
Members of the American Psychiatric Association got a taste of the impact of the country's malpractice crisis in May when Legion Insurance Company was taken over by Pennsylvania regulators. Legion provided coverage for over 7,600 APA members. A new plan underwritten by commercial insurance giant American International Group will cost 30% more per year.
Psychiatrists generally pay significantly smaller premiums than high-risk specialists. One comparison study showed that the average premium for psychiatrists in Dade County, Fla., who do not utilize electroconvulsive therapy was $29,045--a fraction of the $200,000 plus for cardiovascular surgeons, neurosurgeons and obstetrician-gynecologists.
Because insurance is regulated by states, rates can vary widely based on location. For example, a psychiatrist in Los Angeles could pay as little as $7,000 a year for $1 million to $3 million in coverage. Earlier this year, similar coverage would have cost $6,724 in Long Island, N.Y.; $16,559 in Wayne County, Mich.; and $11,981 in West Virginia.
"It becomes difficult to talk about rates in general because there are so many variables," according to Martin Tracy, president of Professional Risk Management Services Inc., which manages the APA-endorsed professional liability program. Tracy told Psychiatric Times, "There is a 'book rate,' but the rate an individual doctor actually pays depends on [their] claims history, what subspecialties [they] may have, and what state they're located in. Most companies give a premium credit to doctors who are in the early years of their careers. It's possible that two psychiatrists with the same kind of practice in the same building could wind up paying different premiums."
Psychiatrists can reduce their premiums in many states by taking an approved risk management course.
"Most states do recognize that doctors who receive some kind of risk management education are better risks," Tracy said.
Some carriers also charge a higher premium for psychiatrists who utilize ECT. "Some companies perceive ECT as being a higher-risk procedure," Tracy explained. "The carrier that we have used over the years and the carrier we have switched most of the business to have accepted our perception that ECT is not a high-risk procedure. They do not charge any additional premium, but it's not unusual to see it with other carriers."
Norman E. Alessi, M.D., a professor in the department of psychiatry at University of Michigan, sees another potential fallout from the emphasis on malpractice insurance.
"Many of my colleagues live in a state of not wanting to push the envelope that far, because they fear the consequences if they're not successful," he told PT. "People feel an enormous sense of vulnerability. We're not even allowed to develop relationships with patients anymore in the managed care environment, which is what psychiatry was all about. People aren't taught those skills anymore. I believe that's one of the contributing factors to the lawsuits--we don't get to know our patients," he added.