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Bob Carroll
Bob Carroll
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Caps On Medical Malpractice Damages Produce Windfall Insurance Profits

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When the Florida Legislature was being pressured to place a cap on the damages in medical malpractice cases there were those who said doing so would only result in windfall profit for the medical malpractice insurance industry. They were right.

Three years after the Legislature capped medical malpractice payouts, insurance company payouts have decreased dramatically, but not their rates.

Malpractice payouts dropping

This week, Florida regulators agreed to give the state’s insurance consumer advocate a hearing on his contention premiums ought to be slashed 40 percent to 50 percent. No date has been set.

The savings, consumer advocate Steve Burgess contends, should be passed on to patients who gave up legal rights when there is a medical mistake.

“The legislature undertook major reform and they did it with the explicit reasoning of lowering the cost of malpractice to the medical community and ultimately to the patients,” Burgess said Thursday.

“The Legislature did not undertake all of these extremely difficult decisions in order to provide a windfall profit for the medical malpractice insurance industry.”

In 2003, Florida insurance companies complained to lawmakers that large jury awards in medical malpractice cases were driving up the premiums they charge doctors. The Florida Medical Association, which also received bonuses from some of those insurers, joined in lobbying for limits on jury awards.

Consumer advocates countered the rate hikes were part of a normal underwriting cycle, and insurers were attempting to recover losses from years when heavy competition had driven rates downward.

After many tries and several special sessions, the Legislature struck a compromise that capped judgments.

Pain and suffering awards, for instance, are limited to $500,000 per physician and $1 million per case, even when the medical error kills someone.

A national accounting firm at the time estimated the savings to insurers would be 7.8 percent.

The reality has been dramatically steeper, according to Burgess.

He cites insurance industry data that shows medical malpractice legal costs and payouts since 2003 have dropped 43.6 percent, from $989 million to $557 million.

A report last week from the Office of Insurance Regulation said Florida’s 15 largest medical malpractice insurers had 2005 profits of $803 million.

Since October 2005, eight new insurers have entered the Florida med-mal market, according to the report.

“The policymakers of this state did not impose these sweeping reforms merely for the purpose of providing serendipitous enrichment to insurance carriers,” Burgess argued in November when he asked regulators for a hearing.

My suggestion would be to remove the damage caps so that some of the serendipitous enrichment of the insurance carriers can go back to the actual victims of medical malpractice.