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NEWS RELEASE
Dec 05, 2002


CONTACT: Doug Heller - 310-392-0522 x309

California's Second-Largest Medical Malpractice Insurer Withdraws 15.6% Rate Hike After Group Challenges Increase

Prop 103 Blocks $2,000/Year Rate Increase for 9,100 California Doctors
Santa Monica, CA -- Facing a hearing requested by consumer advocates under Prop. 103, California's second-largest medical malpractice insurer has withdrawn its application to raise its 2003 premiums for doctors by 15.6%. The Foundation for Taxpayer and Consumer Rights (FTCR), the citizen group that challenged the SCPIE Holdings rate increase, said its action would save the 9,100 SCPIE-insured doctors in California $2,000 each . The group also noted that medical malpractice hikes have caused controversy around the country.

"Rather than open its books to independent scrutiny and justify its request for a double-digit rate hike, as it is required to do under Prop. 103, this insurance company apparently decided it didn't need a rate increase after all," said Harvey Rosenfield, President of FTCR and author of Prop. 103, the 1988 voter-approved insurance reform initiative. "This is just as we suspected. If other states had the kind of stringent rate regulation required by Prop. 103, there would be no medical malpractice 'crisis' in America today," he said.

Doctors Should Examine Insurance Industry Rather Than Attack Their Patients

The FTCR challenge to the SCPIE rate request comes as the insurance industry has initiated massive rate increases nationwide in medical malpractice coverage -- the insurance physicians and hospitals buy to protect themselves in the event they injure or maim patients. (According to a Harvard study more than 150,000 Americans die each year from medical mistakes).

Insurers have blamed malpractice lawsuits for the rate hikes, and enlisted doctors in a propaganda campaign to win laws limiting the right of victims of medical mistakes to sue doctors. This year, Nevada and Mississippi passed such laws at the behest of the insurers and doctors. And President Bush has signaled that a federal law to limit the rights of medical malpractice victims to receive full compensation will be a top congressional priority in the coming year.

The model for these efforts is, ironically, a California law, the Medical Injury Compensation Reform Act (MICRA). It was passed after a similar 'crisis' in 1976. Studies have shown that MICRA did not reduce insurance premiums for doctors. Indeed, premiums did not drop until after the passage of Proposition 103 by California voters in 1988.

"For too long, lawsuits have been improperly blamed for the rise in insurance costs, while the insurance companies quietly requested their own rate hikes, hoping no one would notice. Prop 103 allows us to shine a spotlight on the entire industry, and we intend to continue our efforts to expose this hypocrisy," said Daniel Zohar of the Zohar Law Firm in Los Angeles, a private firm assisting the FTCR with its rate challenges. "The insurance industry increases premiums on doctors, limits payments to injured patients and walks away with the profit. By forcing insurers to open their books, doctors will find that their real battle is with the insurance companies, not the legal system."

Consumer advocates say that scrutiny of insurers' financial data shows that the companies are hiking premiums to offset stock market losses, not rising claims. A recent study by FTCR showed that major insurers lost billions of dollars after investing in corporate stocks and bonds, such as Enron and WorldCom.

Stringent Regulation of Insurance Companies Lowers Rates

Passed by California voters despite a record $80 million campaign against it, Proposition 103 gives state regulators and the public powerful tools to investigate and limit the insurance industry's rates and practices.

SCPIE, located in Los Angeles, filed an application for its rate increase on September 16, 2002, as it is required to do under Proposition 103. This was its third rate hike in three years and its fifth in seven years. FTCR reviewed the application with national experts and requested a hearing under Insurance Code section 1861.05, the Prop. 103 provision which allows members of the public to challenge rate increases. Under that law, the California Department of Insurance (CDI) must grant a hearing for a challenge to any increase above 15% for commercial lines of insurance (7.5% for personal). CDI granted the hearing on November 22. SCPIE then withdrew its request on November 27.

"Clearly the eighteen million dollars SCPIE wanted to add top doctors' premiums was unnecessary," said FTCR's senior consumer advocate Doug Heller. "This should be a wake-up call to the nation's doctors, who have accepted the insurers' propaganda and joined with these companies in an assault of their own patients. It is certainly strange that doctors in California have never challenged a malpractice rate increase --leaving it to a consumer group to protect them against the rapacious insurance industry. Doctors should examine the insurance industry and its propaganda more carefully before backing the industry attack on patients' rights. To not do so is moral malpractice."

"Caps on recovery of damages not only been bad for injured patients, it has done nothing to keep malpractice insurers from continuing to raise rates for doctors. Only a strong regulatory system and a strong regulator will control medical malpractice insurance rates," said Heller.

FTCR Litigation Director Pamela Pressley and Los Angeles attorney Daniel Zohar represented FTCR.

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