Good news: Medical malpractice insurance rates going down

Looking for good news in a bad economy? Medical malpractice rates have not only stabilized but are decreasing.

According to the latest available information, rates in Arkansas are down 1.3 percent since 2006 as a result of malpractice insurance companies paying out less in claims, and they appear likely to remain at low rates.

According to Lars Powell, Ph.D., Whitbeck-Beyer chair of insurance and financial services at the University of Arkansas at Little Rock College of Business, “Every new piece of information we get about claims and loss experience has been less than what we’ve seen before. So it’s possible the rates could go back up. But you would expect to see that precipitated by large losses or an increased frequency of claims, and to my knowledge, we haven’t see either one in Arkansas yet.”

The decrease follows a big run-up in rates during the first part of the 2000s, when the state Insurance Department allowed companies to have double-digit increases several straight years and turned down increase requests of as much as 100 percent.

So why are the rates going down? Primarily it’s the economy. Nationally, the Physician Insurers Association of America says claims frequency is down 25-30 percent from four or five years ago. That’s because plaintiffs’ attorneys don’t want to pay the high costs of filing suit unless they have a very good case. According to the PIAA, only 30 percent of all claims filed against doctors end up in a payment to the plaintiffs.

There are also more competitors in the marketplace. In 2004, when the dominant St. Paul Fire and Marine Insurance Company abruptly left the market, no one was offering coverage. Now there are a couple of dozen companies either renewing business or seeking new policyholders.

Other reasons: Arkansas has not had any huge verdicts in several years. Also, physicians appear to be doing a better job of applying risk management practices that reduce the potential of a lawsuit.

One factor not really affecting the rates: tort reform. Arkansas’ 2003 law has been eviscerated by the courts. Health care reform also should have little effect, good or bad, on rates.

We’re due for a comprehensive Insurance Department report that will shed more light on the subject. I will keep you posted.

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