40% of State's Doctors Save $35 Million in Wake of Recent Proposition 103 Challenges to Top Companies' Proposed Hikes
A consumer group's challenge to Norcal Insurance Mutual Company's proposed 9.9% medical malpractice insurance rate hike, and the ensuing scrutiny by California Department of Insurance regulators, led the state's largest malpractice insurance company to slash its rate request by 70%, resulting in a $11.6 million savings to Norcal-insured doctors. The agreement reached on Norcal's rates reflected key findings in September's precedent-setting decision by the California Insurance Commissioner to cut the rates of SCPIE Indemnity Co., the state's second largest medical malpractice carrier, by 36% and save SCPIE physician-policyholders more than $23 million. The rate reviews were triggered by the Foundation for Taxpayer and Consumer Rights (FTCR), a California nonprofit organization, under the state's insurance reform initiative, Proposition 103.
"Proposition 103 and insurance regulation saved Norcal's California doctors more than $11.6 million in unjustified premium hikes," said FTCR's staff attorney Pamela Pressley. "The process that we undertook with Norcal, subjecting their books to a thorough actuarial review, is the only effective way to keep medical malpractice rates down."
Insurance Regulation, Not Malpractice Caps, Shields Physicians From Unfair Rates
Insurers and medical associations in states around the country and on the national level have pressed lawmakers to restrict the rights of injured patients to recover damages in medical malpractice cases, arguing that such restrictions are crucial to reducing medical malpractice premiums. But consumer advocates disagree.
"Insurers prescribe California's malpractice cap as a cure-all for the medical malpractice premium crisis, but that is a misdiagnosis with dangerous side-effects," said Doug Heller, FTCR's senior consumer advocate. "In one year FTCR has saved California doctors more than $30 million dollars by challenging excessive rate hikes under California's insurance regulations. Insurer greed, not victims seeking compensation for their injuries, is to blame for skyrocketing malpractice premiums."
In California, insurance companies are subject to Proposition 103, a voter approved 1988 ballot initiative that governs the insurance industry. Proposition 103 created a "prior approval" system in which companies must justify any rate changes to the insurance commissioner before the rate can take effect. The measure also included a mandatory rate rollback, which resulted in a direct refund of more than $75 million to California physicians. The law forces insurers to comply with a series of regulations that limit company profits and administrative costs as well as requiring full disclosure of the data that go into rate proposals.
Prop 103 also ended the insurance industry's exemption from state anti-trust laws and allows the insurance commissioner to deny excessive rate hikes or require a company to lower its rates. The law provides another layer of consumer protection by giving consumers and groups like FTCR an independent right to challenge rate hike proposals. However, rather than bring such challenges on behalf of member doctors , medical associations throughout the country have typically sided with insurance companies, arguing that laws should restrict victim's legal rights rather than require insurance companies to price their product fairly.
FTCR is also reviewing the recently filed proposal by The Doctors Company to hike its doctors' medical malpractice insurance premiums by 9.8% and a proposal to raise insurance rates for California homeowners with Safeco policies. Last month, an FTCR challenge to a 10% rate hike to Auto Club of Northern California's homeowner's insurance resulted in a $26 million savings for consumers.