I would be curious to know what the effect of the California law has been on the costs of health care insurance and doctor’s malpractice insurance. In theory, both of these should have declined as awards and fees fell.

In theory, at least, I’m in favor of the free market. fee caps are a form of wage control. You wouldn’t like it if it happened to you, so why impose them on some one else? Why exactly is the free market unable to handle this problem?

>>Why exactly is the free market unable to handle this problem?

Because the free market is not applied uniformly to the medical marketplace. If it is even applied at all.

When physicians are free to decline to do high-risk work, when we are free to decline to take call, allow us to turn down the very sick or very high-risk patients……..

When OB/GYN’s are free to say they want to do ONLY gynecology and NOT obstetrics (many hospitals have policies forbidding this, or requiring ten, twenty years of OG/GYN practice before you can do just GYN)…….

When neurosurgeons are free to say they will do elective spine surgery and not head trauma……

Or when a physician takes on a high-risk patient, he is able to ask for a ten-thousand dollar fee for, say, a high-risk pregnancy….

Then maybe the free market can solve the problem.

There are really not enough states with insurance programs modeled after California’s MICRA, but we do know there has not been any hint of an insurance crisis there, with the malpractice rates affordable for everybody, and way below, for example, of those now being charged in Florida, which has some of the highest in the country.

Although the state legislature passed a cap of $500,000 last year, Florida physicians did not feel this was enough, with the rates remaining high, and getting higher for some specialties. Only six carriers remained out of more than 60 that were doing business a decade ago.

So the FMA has come up with a constitutional amendment, due to be placed this November, that would reduce contingency fees for trial lawyers to 30% of the first $250,000 award, then to 10% above that amount. This measure, if passed, would give more of the payouts to malpractice victims and less to the lawyers. Physicians also expect a chilling effect on lawyers filing frivolous suits, which they can use to shake down physicians for settlements. Defending these suits nowadays, no matter how meritless, can cost up to over $40,000 per case.

Public opinion polls so far have been favorable for physicians, so favorable that trial lawyers, in retaliation, have come up with three admendments of their own to counteract the FMA’s measure. None of these amendments is viewed positively by the public.

This battle in Florida is indeed something to watch. If we are successful, this may be something other states may want to do.

So it sounds like Florida and Texas with damage caps aren’t much better off than we are here in Nevada with ours.

Our rates are still pretty high. I think California might be a bit sui generis here.

Nevada’s tort reforms will be new as well, I imagine. Actually, I did not know your state actually HAD passed tort reform. Hadn’t paid attention much since the trauma center problem a few years ago. Unfortunately, your doctors showed “good faith” to a group of people who wouldn’t know what good faith was if it bit them…….you know.

Certainly I understand the motivation and admire the professionalism of the trauma docs. Unfortunately, the lawyers and politicos count on our good nature when they screw us.

No, Even, it makes all the sense in the world.

The actuaries can indeed calculate future loss as you say. They also have the common sense to know that the caps could vanish in a moment.

It happened in Illinois on multiple occasions. Tort reform gets passed, and promptly overturned in the courts. Multiple states have gone through that same process, though Illinois probably one of the worst.

So the actuaries are not going to make a strong recommendation to lower rates until they are SURE that the tort reforms will not vanish in a year.

The particular problem with malpractice insurance actuaries, versus other lines of insurance, is the time line and the uncertain nature of the loss.

A malpractice case could come up a decade or two after the event, depending on the state. Life insurance sees that as well, but with life, the loss is predictable. It’s the dollar value agreed to in the contract.

Malpractice, the loss could be one or two decades later, and the loss is fairly unpredictable because of the speculative nature of the noneconomic damages.

Cap today.

Bad event today.

Lawsuit filed today.

Cap found unconstitutional in one or two years.

Malpractice lawsuit DOES NOT EVEN HIT THE COURTROOM for five years or more.

You’re telling me you can’t understand that????

So based on that REALITY (I say “reality” because this has happened in multiple states, including my own)… how are you going to price the malpractice policy next year? Pretend you’re the actuary for the insurance company. The malpractice event in question. Say the economic damages are nine hundred thousand dollars ($900K). Non-economic damages could be capped at, say, $500K.

Or maybe the tort reforms could vanish in two years and the damages could be unlimited. Maybe a sililar case in that state got $10 million non-economic damages before tort reform passed.

So how do you predict the payour in five or ten years?
Will it be $900K + $500K = $1.4 million?

Or will the insurance company be expected to pay $900K + $10 million = $10,900,000?

You are required by state insurance law to be responsible with your premium pricing to anticipate your expected losses.

How do you price the insurance?