Arkansas' market for medical
malpractice insurance has not significantly changed since the
passage of a tort reform law in 2003, according to a report issued
by the Arkansas Insurance Department to state lawmakers Friday.
Act 649 of 2003 made changes in how patients
can sue health-care providers for medical mistakes. It put a limit
on punitive damages. Backers had described it as necessary
to help control the rapidly increasing costs of medical
malpractice insurance and to encourage insurance companies to keep
providing such coverage to health-care providers in the state.
Critics questioned how the law would lower insurance rates, saying
that it would merely protect insurance companies from valid
lawsuits.
"I don't think the tort reform law is
intended to impact the insurance rates, it is intended to increase
profit," said Morgan E. "Chip" Welch,
a lawyer in Little Rock and a critic of tort reform legislation.
Friday's report shows that insurers still lost
money in Arkansas in 2003, the year the law took effect.
According to the report, for every dollar paid
to insurance companies in medical malpractice premiums, the
companies paid out $1.30 in costs.
"Loss adjustment expenses and the cost of
defense are still significantly higher in the medical malpractice
line than others," the report states. "Nothing has
changed in this respect in Arkansas." Lenita Blasingame, a
deputy commissioner at the insurance department, said companies
lost $1.59 for every dollar in premiums in 2002. The reported
decrease isn't due to tort reform, Blasingame said.
She and others said it's too soon to tell if
the law has had its desired impact. Blasingame said the
lower ratio of premiums to costs could be due to any number of
factors. "It may have just been a
good year," Blasingame said. "I still think its too
early to say if tort reform is responsible."
The decreasing ratio may be due to price
increases among insurance companies, which were approved by the
department.
Welch questioned those numbers, noting that
they included costs for claims adjustment, which he said should be
considered an "overhead" cost for the insurance company
not related to litigation.
"These numbers are weighted so as to allow
the insurance industry to write off its overhead and claim that
it's part of a tort crisis," Welch said.
According to the department's report, 2003 saw
nine companies increase their base rate for medical malpractice
insurance. One, Continental Casualty Co. of Chicago, increased
rates for hospitals by 24 percent.
In 2004, three companies increased rates. State
Volunteer Mutual of Nashville, Tenn., which now insures a majority
of the state's doctors, according to the Arkansas Medical Society,
increased rates by 13.6 percent, according to the report.
Preferred Professional Insurance Co. of Omaha, Neb., raised rates
by 100 percent, the report said.
"When you see a 100 percent rate increase,
you have to know that their rates were woefully inadequate,"
Blasingame said.
She said lawsuits dealing with incidents that
occurred before the law's passage - and therefore are governed by
earlier rules - are still pending in the state's courts.
"The reality is until we get two years
down the road or maybe even three, you're not going to see a lot
of change simply because of tort reform," Blasingame said.
"There's no history yet of what impact
tort reform is going to have," said David Wroten, a spokesman
for the Arkansas Medical Society, which represents the state's
doctors.
The department's report was the first issued
under Act 1007 of 2003, which required the department make annual
reports on the state's medical malpractice insurance market.
Among other changes, Act 649, the tort reform
law, limits punitive damages - which are meant to punish
defendants for particularly bad behavior - to $250,000 or three
times the amount of compensatory damages awarded if that amount is
less than $1 million.
It also requires that plaintiffs use "a
medical care provider of the same specialty as the defendant"
to prove that the defendant was negligent.
Rep. Danny Ferguson, DForrest City, who
sponsored Act 649, did not respond to a telephone message left at
his office Friday.