Medical liability insurance premiums are skyrocketing in Mississippi, squeezing health care costs and creating unfavorable situations for doctors that practice in rural areas.
In less than a year, 11 of 37 companies offering health care insurance, including medical malpractice, have left the state, and those that remain have increased insurance premiums up to 65% for Mississippi physicians.
Industry watchers say the increases result mainly from a sharp rise in jury awards, now averaging $3.49 million nationwide, and settlements, particularly in Mississippi, considered one of the most litigious states in the nation. They also point to the downturn in the stock market because insurers can no longer use stock market gains to subsidize low rates.
“We’re approaching a major crisis for liability insurance for Mississippi doctors,” said George Dale, state insurance commissioner. “The legal climate isn’t the only reason for the situation, but it’s a major one. Even though there are a limited number of large awards, every case filed costs a tremendous amount of money to prepare.”
Medical malpractice companies that reported staggering loss ratios last year include:
• NCMIC Insurance Co. — 544.2%
• St. Paul Mercury Insurance Co. — 510.3%
• Continental Casualty — 379.3%
• St. Paul — 342.2%
• Coastal Insurance Enterprises — 299.3%
• Executive Risk Indemnity — 234.3%
Remaining insurers that requested hefty increases include:
• St. Paul — 65%, effective Aug. 15
• Medical Assurance of West Virginia — 60% for physicians; 79.9% for dentists, pending.
• State Volunteer Medical — 20%, effective July 3, its first rate increase since 1992.
Andrea Wood, senior communications specialists for the St. Paul Companies, said the rate increase brought Mississippi rates in line with the rest of the nation. The corporation filed for rate increases in 28 states.
“This situation is not unique to Mississippi,” Wood said. “Historically, Mississippi physicians and surgeons have had lower rates than many other states, but our five-year average loss ratio for medical malpractice in Mississippi is 141%. For every dollar we bring in, we’re paying out $1.41 in losses. This excludes expenses, which would increase this ratio by another 28% to 30%. We showed the need for rates increases we requested and received.”
Jay Fishman, who was recently named as CEO of St. Paul, the second-largest malpractice insurer, is evaluating all lines of the business and has publicly identified three problem areas of the company, including the health care line. Wood wouldn’t say whether or not St. Paul might pull out of Mississippi, adding only that “everything is on the table for review and evaluation.”
“St. Paul came to us with a request for a 75% rate increase with the promise to stay active in the marketplace,” Dale said. “We didn’t want to approve a 75% rate increase, even though they had a 141% loss ratio. We negotiated to 65%, but as soon as it was granted, they non-renewed about 40 OB/GYN and emergency room doctors. We went back to them and said that wasn’t the understanding. They said they would continue coverage at 75%, but the deal was off at 65%. Now we’re reevaluating the rate increase. I’m much more concerned about providing a market than the cost. That’s not a good thing politically for me to say, but it doesn’t do any good to have a cheap product if it’s not available.”
This year, Medical Assurance Company of Mississippi (MACM), has received approximately 250 new applications from physicians who have been forced out of coverage either because of excessive premiums or their insurer has left the state. That number is expected to rise because many policies renew in the late fall. MACM was established in 1976 by members of the Mississippi State Medical Association as the result of a malpractice crisis and currently insures nearly 70% of doctors in the state.
Because rate hikes for medical malpractice insurance have been highest for obstetricians, gynecologists and surgeons, those doctors have been practicing more defensively, often ordering additional tests and opting for procedures that limit their risks. Caesarean deliveries, even though more costly, are on the rise.
“If you compare the number of lawsuits with the number of doctors in the state, about 90% of the obstetricians practicing medicine in Mississippi for 10 years or more have been sued,” said Charles M. “Chuck” Dunn III, COO and vice president of claims for MACM. “With the same criteria, 100% of neurologists have been sued, and 75% of general surgeons, orthopedic surgeons and emergency personnel have been sued. Approximately 71% of claims in the state are dropped, 20% are settled, and 8% go to court.”
Dr. Hugh Gamble, a Greenville surgeon and president of the Mississippi State Medical Association, said, “The trouble is that each case, no matter the outcome, is costing at least $40,000 to $50,000 to handle, even when they don’t go to trial. The number of cases, as of June 2001, exceeded the number of cases for all of last year.”
So far this year, the average payment for claims insured by MACM is approximately $211,000 regardless of the outcome. Last year’s average per case was $156,000, an increase of 35%, Dunn said.
Gamble said some doctors have stopped performing certain high-risk procedures because of liability concerns. Rural communities are taking the biggest hit, as obstetricians gravitate to metropolitan areas or stop deliveries altogether.
“At a clinic in the central part of the Delta, where an average of 750 deliveries are performed each year, doctors are drastically cutting back,” Gamble said. “Last year, the clinic had six providers, four of whom delivered babies. Now they have two. Because the insurers have limits of 250 deliveries a year, that leaves 250 women looking for someone to deliver their babies.”
Last year, the four physicians at the Delta clinic paid $130,000 for $3 million/$3 million coverage. This year, they’ve been quoted a rate of $485,000 plus sales tax and a $10,000 deductible per claim for $1 million/$1 million coverage.
“In the heart of the Delta, where Medicaid pays $700 a delivery, how many deliveries do you have to do to cover all the expenses?” Gamble asked. “It’s a downward spiral on the entire economy. When medical care is lacking, no one wants to move industry into an area.”
Michael D. Houpt, CEO of the Medical Assurance Company of Mississippi (MACM), said “family practitioners everywhere that deliver babies will soon be a thing of the past.”
“It’s very cost prohibitive for them,” he said. “A family doctor told us the other day how much he lost on every single delivery.”
Dr. Carl Reddix, an OB/GYN in Jackson, graduated from Tougaloo College, received a master’s degree in public health from Harvard University, studied at Tuft’s University School of Medicine in Boston before returning home to practice medicine. About one-third of his patients have Medicaid insurance.
“I haven’t regretted coming home, but the cost of doing business here is a problem and poor people are suffering,” said Reddix. “Some days, I’m not sure how we’re going to handle it. Reimbursements have gone down slightly and overhead is up on almost everything. We’re seriously considering cutting take-home pay.”
Before 1995, the largest punitive damage award in Mississippi was $8 million. Since then, at least half a dozen jury verdicts have topped $100 million. Legislators have not set maximum limits on jury awards and adopted other new civil liability la
ike its sister states have.
“The first issue the Mississippi Legislature needs to address is venue,” said Gamble. “Plaintiffs are shopping for areas where juries are historically giving away huge awards and they know they can get it here. Second, joint and several liability needs to be addressed. Under the law, you