While the media would like us to believe that the rising cost of healthcare is due primarily to the rising cost of physician and surgeon medical malpractice insurance, this is simply not the case. The truth is that rates for medical malpractice insurance in Florida have been steadily declining for the past ten or so years and are now stable. In a world where medical malpractice insurance rates are cyclical, this decline of rates is an anomaly. So, why are rates for medical malpractice insurance in Florida lower than they were 10 years ago? There are several interesting reasons.
- The influence of tort reform
- Decline in the frequency and severity of claims
- Competition and discretionary credits
- Alternative forms of insurance
- Risk management
The Influence of Tort Reform on Florida medical malpractice insurance premiums
As a result of the medical malpractice insurance crisis of the early 2000’s, the Florida legislature has made major initiatives to protect Florida hospitals, physicians and surgeons as well as medical malpractice insurance companies, who were leaving the state in droves, from the huge payouts they were experiencing during the crisis. The tort reform enacted during this time, although it has been overturned in recent years, has resulted in a more stable marketplace and lower medical malpractice insurance premiums.
In 2013, the Florida legislature addressed several areas of the law that proponents said were exposing physicians to legal action and contributing to higher medical malpractice costs.
At the center of the legislation was a provision concerning the right of a Florida physician or surgeon to consult an attorney that was retained by the medical malpractice insurance company. Under the new legislation, the medical malpractice insurance company may not choose the attorney for the physician or surgeon, but may recommend attorneys it likes. The legislation prevents the attorney for the physician from providing any information to the medical malpractice insurance company other than his invoices.
Another provision of the tort reform legislation requires that an expert witness testifying against a Florida physician or surgeon be in the same specialty as the physician or surgeon. Before the legislative change, the Florida expert witness could well be in the same or a similar specialty as the physician. The courts had very broad authority to deem what constituted a similar specialty.
Decline in the Frequency and Severity of Claims
Both claim frequency and severity are generally down in Florida. As a result, Florida medical malpractice insurance companies have been profitable. As a result, rates have stabilized.
Competition Among Insurance Companies
For about ten years during the late 1990’s and early 2000’s, malpractice insurers were either exiting the state or refusing to write new business because the market was not profitable. As a result, rates were very high, it was difficult to qualify for insurance with the better companies, and physicians were being cancelled if they experienced even the slightest problem. There were marches in Tallahassee and the newspapers were filled with horror stories of physicians and surgeons closing their practices because of the high cost of medical malpractice insurance. Now that medical malpractice insurance companies can make a profit selling medical malpractice insurance in Florida, companies have come back into the State to capture a piece of the lucrative market. For the past ten years or so, the major medical malpractice insurance companies have been fighting for new business and applying discretionary credits to keep existing business on the books. This has been a huge benefit to Florida physicians and surgeons, and to the citizens of Florida who wish to be served by the best physicians in the country.
Alternative Forms of Medical Malpractice Insurance
Florida physicians and surgeons have sometimes joined together to create Risk Retention Groups or Risk Purchasing Groups as alternatives to traditional medical malpractice insurance companies. While these groups were formed during the medical malpractice crisis of the late 1990’s and early 2000’s, many of them have stayed and prospered. Risk Retention Groups, for example, formed by physicians or surgeons of like kind, require less capital and are less highly regulated than traditional medical malpractice insurance companies. These alternative sources of medical malpractice insurance in Florida have been part of the initiative to bring down the cost of insurance.
Risk Management Initiatives
Back during the medical malpractice insurance crisis, insurance companies, hospitals, and other bodies realized that they could play a major part in reducing the cost of insurance for their insured physicians and surgeons. They aggressively turned their focus to Patient Safety initiatives, designed to create better outcomes for patients and thereby reduce the risk of a lawsuit. These Risk Management programs, for which there is often a hefty credit applied, instruct physicians and surgeons in basic communication and listening skills, improved patient relationships, and better use of technology—all resulting in lower premiums and more satisfaction on all sides. Claims are awful even if they are successfully defended. The Risk Management programs have gone far in reducing claims from ever happening in the first place.
Barbara Gracey Backer
Barbara Gracey Backer is the Vice-President of Gracey-Backer, Inc., an Insurance Agency in Delray Beach, Florida specializing in All Lines of Professional and Personal Insurance. She may be contacted at 800-272-6055 X118 or at firstname.lastname@example.org.