Tuesday, February 04, 2003

Maybe you've heard about some of the problems going on in West Virginia or New Jersey (NYT article, requires registration) with Doctors striking because of the exhorbitant rise in malpractice insurance.

This is generally followed by conservatives ranting and raving about tort reform and those awful that trial lawyers being responsible. Then aim is taken at their Democratic enablers who are beholden to them. In fact there have been laws passed to restrict 'pain and suffering' awards in lawsuits thinking that this will curb insurance premiums which seem to be rising at exponential rates.

When this happens, do yourself a favor, please read this article in the Detroit Free Press first -

In Michigan, for example, where damage caps like the ones Bush seeks nationwide were implemented more than eight years ago, medical malpractice insurance rates are among the highest in the nation -- and rising. Detroit internists and general surgeons pay the second-highest malpractice insurance rates in the nation, according to a survey by the Chicago-based Medical Liability Monitor. Michigan remains on an American Medical Association list of "problem states" with high malpractice insurance rates nearly a decade after damage caps were instituted.

Data from other states where damage caps have been imposed further demonstrate that limitations on damages do not halt rising insurance and other health care costs, as the president contends. In California, malpractice insurance premiums increased by 190 percent during the first 12 years after implementation of a $250,000 damage cap, according to a 1995 study by a California research group. A bipartisan legislative report in West Virginia, where surgeons facing soaring insurance rates staged a walkout earlier this month, concluded that limitations imposed on the judicial system has "no immediate effect on the cost of liability insurance for health care providers."

Many doctors blame trial lawyers for driving up insurance costs with frivolous lawsuits and unnecessarily large jury awards. But the New Jersey Chapter of the Association of Trial Lawyers of America (ATLA) said any premiums hikes were due to diminished investment portfolio returns among insurance firms.

Taken from NYT article linked earlier -
``Jury awards have been relatively consistent,'' said ATLA New Jersey President Bruce Stern, who cited a report by the consumer advocacy group Public Citizen that said malpractice payouts and premiums have hardly budged since 1992.

Insurance premiums aren't rising because of trial lawyers getting more money. It's because the Insurance Industry has lost so much money in the stock market. -

The property/casualty insurance industry's $7.billioin net loss after taxes in 2001, its first-ever net loss for a full year, was in stark contrast to its $20.6 billion in net income in 2000. Factors contributing to the net loss in 2001 included higher losses on underwriting due in part to the terrorist attack on September 11 and sharply lower gains on investments because of declines in interest rates and the stock market.
- from an Insurance trade magazine article

Even the Republicans know it. This whole tort reform is a bait and switch deal, where something (malpractice suits/trial lawyers) that has nothing to do with the problem (rising malpractice insurance) gets blamed and is threated with regulation, while the real culprit (poor money management by the unregulated Insurance Industry) goes scott free. So we're gonna regulate payouts on court decisions, something that has not changed in correspondence to the rising insurance premiums of recent years, while regulation the way the Insurance Industry doesn't get discussed. FYI - the Insurance Industry is a sector of the business world that doesn't play by the same rules as every other sector. From the DFP article again;

Insurance companies enjoy a special legal status that is not available to car manufacturers, retailers or airlines: They are largely exempt from federal antitrust laws. This exemption makes the insurance industry ripe for price-fixing and other anticompetitive behaviors that hurt consumers and drive up prices.

Legislation introduced last week by Sen. John Edwards, D-N.C., who is seeking to replace Bush in the White House, and others would strip insurers of this shield from the market pressures and legal restrictions applicable to other American businesses.

Ensuring legitimate competition in the insurance industry would make it more difficult for fiscally irresponsible insurers to attempt to recoup substantial losses due to stock market declines or other events by hiking insurance rates. Insurance companies are uniquely able to attempt to pass off their losses through sharply increased rates because they do not face the competitive considerations that Ford Motor Co. or Kmart must consider when pricing products.

This is so typical of the political games that seem like the norm in this nation, at least lately. There are too many people in government who seem more obsessed with the methodology of solving a problem rather that getting the problem solved.

Here's more information on this subject.

The stock market is killing your life insurance - If your premiums are paid with investment returns, you may find yourself with reduced coverage or a policy that expires years early. (from MSNBC.com)


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