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Mar 04, 2005

CONTACT: Lawrence Markey, Jr. (310) 392-0522 x317

California Group Blocks $7 Million Rate Hike Proposed by California's 2nd Largest Medical Malpractice Insurer

Prop. 103 Prevents The Doctors Company's 5% Rate Increase
Santa Monica, CA -- California's 2nd largest medical malpractice insurer withdrew a proposed $7 million rate hike after a challenge by the non-profit Foundation for Taxpayer and Consumer Rights (FTCR). The cut will save each physician insured by The Doctors Company nearly $1,000. Consumer advocates hailed the withdrawal as further proof that Proposition 103's insurance reforms, and not California's malpractice damage cap, have held down medical malpractice and other insurance rates since the initiative passed in 1988.

FTCR filed its formal challenge to The Doctors Company's proposed rate hike with the California Department of Insurance in January, alleging that the rate request was based on unreasonable actuarial assumptions and estimates. Rather than defend its proposed increase in a public hearing as allowed by Proposition 103, the company chose to withdraw it.

"The Doctors Company withdrew their $7 million rate hike request without a word of explanation, proving that they didn't need the rate increase to begin with. California doctors have the strong rate regulation of Prop. 103 to thank for shielding them from this price gouging that other doctors across the country are facing," said Lawrence Markey, Jr., staff attorney with FTCR.

Proposition 103 requires insurance companies to justify rate changes prior to imposing increases, and allows consumer groups like FTCR to challenge rate hike proposals and request public hearings. Proposition 103 also required insurers to roll back rates after its 1988 enactment, which returned over $75 million directly to physicians.

Since 2003, FTCR has successfully challenged rate increases in California proposed by three of the nation's largest medical malpractice insurers. The challenges saved doctors insured by SCPIE Indemnity approximately $27 million, doctors insured by Norcal Mutual $16 million and doctors insured by the GE Medical Protective Company $4 million.


FTCR noted that in California, as around the country, medical malpractice insurers have been attempting to push rates dramatically higher in recent years despite California's draconian liability cap. The damage cap, known as the Medical Injury Compensation Reform Act of 1975, or MICRA, is cited by the insurance industry as a model for addressing the national medical malpractice "crisis."

Dr. Richard Anderson, CEO of The Doctors Company, has been lobbying across the country in support of a national damage cap like MICRA and falsely claims that Proposition 103 is not responsible for keeping doctors' rates reasonable in California.

"Richard Anderson is lying to the nation's doctors and his company's actions prove it: Prop 103 stopped The Doctors Company from price gouging, not California's draconian cap on patients' compensation. Doctors should demand that Richard Anderson personally apologize for this attempt to profit by stealing $1,000 out of the pocket of every California physician The Doctors Company insures," said Carmen Balber, consumer advocate with FTCR.

Anderson was paid $1.7 million by The Doctors Company in 2000 alone. Anderson's exorbitant salary, which is almost certainly higher today, gives him a personal financial stake in increasing company revenues by raising premiums and limiting his company's responsibility for medical mistakes, said FTCR.

A study released by FTCR revealed that California's damage cap failed to reduce insurance rates for doctors. In fact, premiums increased 450% in the thirteen years after the passage of MICRA. Only when voters approved Proposition 103's insurance reforms did doctors' premiums drop 20%, and then stabilize. Read the study.

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