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Liability crisis: Is profiteering the problem?

Doctors' prescription-of-choice for what ails the medical liability system is, undoubtedly, tort reform, which the faithful believe will lead to lower malpractice premiums. But a report released last month by the Center for Justice & Democracy, a New York-based advocacy group that advertises no connection "to any business or trial lawyer organization," may get at least some doctors thinking about a fresh approach.

The report examined the financial performance of 15 of the nation's largest medical malpractice insurers during the five-year period from 2000 to 2004. Relying mainly on the 2004 annual statements filed with state insurance departments, the report analyzed two major sets of data: (1) what the companies collected in premiums compared to what they actually paid in claims in a given year (paid-loss ratio) and (2) what they earned in premiums compared to what they estimated they'd pay in future claims (incurred-loss ratio). The findings will disturb anyone who's suspected that the industry has gotten a free ride while others sweated.

On point one, the report shows that-although insurers increased their premiums over the five years by 120.2 percent-the amount they paid in claims rose by only 5.7 percent. That's a 21-fold increase in premiums compared to payouts.

News of the study got more than a few people's blood boiling. In a post-release statement, Connecticut Attorney General Richard Blumenthal called for "much tougher, more aggressive oversight to prevent and punish profiteering . . . ."

Blumenthal wasn't simply grandstanding. Earlier this year, he'd joined a chorus of voices calling for a public hearing on the 89.6 percent increase that regulators had granted in 2004 to The Medical Protective Company. (MedPro is among the 15 companies included in CJ&D's industry report.) Doctors were also up in arms over the increase, and in its Oct. 18, 2004 issue American Medical News gave their joint protest with the state's trial lawyers page-one treatment under the banner, "Physicians try fresh approaches to combat liability premium hikes."

Will the new study data prompt other doctors to follow suit? Report author Jay Angoff, a former Missouri insurance director, would "like to think so," although he admits he's frustrated: "I understand why doctors want to limit their liability, but they focus so much on that, they miss the far bigger problem-insurers charging much more than is justified."

But what's a motivated doctor to do? "Get a copy of the annual statements companies have to file with insurance departments, not the cartoon annual reports they send to doctors," says Angoff. "Often, these statements tell a completely different story from what doctors are hearing from their insurers."

If that story outrages you, act.

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