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Jul 28, 2003
CONTACT: Doug Heller - 310-392-0522 x309
Consumer Group Calls on Insurance Industry to Make Medical Malpractice Data Available
GAO Medical Malpractice Report: No Call For Liability CapsInsurance companies should immediately make publicly available data related to medical malpractice premiums in response to the sole recommendation of a report by the United State General Accounting Office (GAO), the nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR) said today. The group said the GAO correctly highlighted the lack of relevant and comprehensive data available to policymakers as the chief barrier to understanding why insurance companies have so dramatically raised physicians' premiums in recent years. The study does not attribute increased premiums to litigation and does not recommend imposing liability caps, as has been proposed by insurers and doctors in congress and in states around the nation.
"The insurance industry must make public the data it has been hiding for years," said FTCR's senior consumer advocate Doug Heller. "The GAO did not find that lawmakers should impose liability caps on injured patients; it found that insurers need to make more information available so policymakers can determine what is really going on. Inevitably, insurers will fight to keep the information out of the public's reach, because whenever data is revealed, insurers' case for liability caps falls apart."
FTCR, which has challenged numerous insurance company rate increases, recently found that California's second largest medical malpractice insurer, SCPIE, proposed to overcharge its doctors by more than $20 million. Under California's Proposition 103, insurers must open their books to public scrutiny and defend rate hike proposals. When asked to explain his company's massive premium increase request in light of California's strict malpractice caps law, known as MICRA, SCPIE's Assistant Vice President James Robertson stated:
"While MICRA was the legislature's attempt at remedying the medical malpractice crisis in California in 1975, it did not substantially reduce the relative risk of medical malpractice insurance in California."
Still, the California MICRA law has been the insurance industry's model for addressing rising premiums, while consumer groups and patient advocates have pressed for insurance industry regulation akin to California's Proposition 103. Click here to read more about this.
GAO Report Finds "Multiple Factors" Contribute to Premium Increase
The GAO study calls for an increase in the amount and type of data that insurers should reveal to the nation's insurance regulators. Based on the information that is available, the GAO identifies a series of different factors that have come together to push physicians premiums upward in recent years, including increased losses, decreased investment income, reduced competition and increased reinsurance costs. The GAO report does not, however, explain why premiums have spiked so dramatically for many physicians.
"To say that an increase in losses results in an increase in premiums is like saying that increased electricity use will lead to higher bills. It does not explain the stratospheric prices," said Heller. "When blackouts hit California during the energy crisis, it was not because of increased electricity use, it was due to secret energy schemes with names like Fat Boy and Death Star, crafted by energy traders at Enron and other power firms. But we didn't understand it until regulators forced the energy industry to open up its books. That is why the recommendation to get more insurance industry data is so important to solving the insurance rate crisis."
The GAO study finds that:
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