Tort Reform Myth Debunked – Damages Caps do not Lower Malpractice Insurance Premiums

We’ve all heard the claims. Jackpot payouts in medical malpractice cases have caused malpractice insurance premiums to go so high that doctors are leaving certain specialties or leaving the profession altogether. To combat this, tort-reformers everywhere call for caps on non-economic damages as a magic bullet for fixing this "problem." Utah is no different.

The Utah Medical Insurance Association, or UMIA, bills itself as the "premier non-profit professional liability insurance in the Intermountain West." The UMIA website offers the following description of the company:

UMIA is a physician owned and directed medical liability insurance company. Practicing physicians are its foundation and strength. As UMIA enters its 28th year of service of the physicians of the Intermountain area, the vision of the future includes a dedication to:

• Maximizing the value of the insured’s premium dollar
• Reducing patient injury by improving patient care
• Providing innovative leadership in fair patient compensation for culpable liability claims
• Developing effective practice and risk management programs

The Utah Medical Association started UMIA in response to a loss of affordable and available medical liability insurance because the commercial multi-line insurers providing coverage at that time withdrew from the market or raised rates astronomically. UMIA is a reciprocal inter-insurance exchange providing liability insurance in Idaho, Montana, Utah, and Wyoming.

UMIA is financially strong with assets at 185.9 million and 43.1 million in surplus. The Company is rated (A-) Excellent by the AM Best Company and has held this rating for many years. A major strength is the leadership provided by the Board of Directors and Board of Governors, both comprised of practicing physicians who understand the needs, trends, concerns, and pressures of current medical practice. Competent and responsive service to policyholders had been and remains the essential element of the Association’s mission and success. Risk management and loss prevention activities remain a high priority.

The bulk of UMIA policies are written in Utah which has been "tort-reformed." Here is a list of "reforms" that have passed in Utah:

1. Shortened Statute of Limitations §78B-3-404
2. Statute of Repose (claims expire even if patient unaware of injury such as undiagnosed cancer) §78B-3-404
3. Abrogation of Collateral Source Rule (negligent care provider gets the benefit of insurance that the patient paid for or that taxpayers provide) §78B-3-405
4. Cap on Noneconomic Damages §78B-3-410
5. Periodic Payment of Future Damages Delaying by Years or Decades the Patient’s Receipt of an Award §78B-3-414
6. Arbitration Agreements §78B-3-421
7. Restriction on Informed Consent Claims §78B-3-406
8. Restriction on Warranty, Guaranty and Contract Claims §78B-3-408
9. Limits on Use of Admissions of Fault §78B-3-422
10. Governmental Immunity Act Time Limits for Claims against the University, residents and other trainees
11. Governmental Immunity Act total damages limits in certain circumstances §63G-7-604
12. Immunity for Emergency Medical Assistance (including paid services) provided by governmental employees §63G-7-302(5)(s)
13. Increased Burden of Proof for Emergency Room Care §58-13-2.5 et seq.
14. Notice of Intent Required Before Lawsuit §78B-3-412
15. Prelitigation Screening Mandatory Before Lawsuit §78B-3-416
16. Federal Tort Claims Act limits on Claims Against the VA Hospital
17. Absolute Immunity for 911 Calls §69-2-6
18. Prohibition on Access to and Use of Peer Review, Incident and Credentialing Materials §26-25-1
19. Limit on Attorney Fees §78B-3-411
20. Limitation on Therapist’s Duty to Warn §78B-3-604
21. Limitation on Damages for Loss of Consortium §30-2-11(7)
22. Good Samaritan Act §78-4-501
23. Extension of Good Samaritan Act and Health Care Providers Immunity from Liability Act to nurse practitioners §58-31b-701
24. Immunity for care provider who renders care at scene of emergency without duty to respond §58-13-2
25. Immunity (except for gross negligence or willful misconduct) for uncompensated care §58-13-3
26. Immunity for certain care providers during emergency declarations §26-49-501
27. Retired health care provider volunteers are immune from suit if care is uncompensated §58-81-104(5)
28. Separate prior trial on any statute of limitations issue §78B-2-114
    

Most of these "reforms" have been in place for years, if not decades, so there can be no argument that not enough time has passed to evaluate their effectiveness. This is particularly true when looking at the effectiveness of the caps on non-economic damages which injured patients have suffered with for a long, long time. Given that, let’s look at 5 years worth of historical data taken from UMIA’s 2008 Annual Statement:

• In 2008, gross premiums written were $70,607,300, up $16 million from 2004.
• In 2008, the total assets of UMIA were $230,718,580, up $64 million from 2004.
• In 2008, the total losses paid were $26,601,949, up $13 million from 2004, but only $2.5 million from 2006.

These numbers demonstrate that UMIA took in almost 3 times more just in premiums in 2008 than they paid out in claims and a similar ratio applies for each year. Moreover, these numbers underscore that damages caps do not lower premiums. Just because tort reformers repeatedly claim a connection between damages caps and lower premiums does not make it so.