There's another side to the so-called insurance ‘crisis' in Montana
Guest Opinion, Great Falls Tribune, June 16, 2002
By Elizabeth Best, Great Falls, President of the Montana Trial Lawyers Association.
The Tribune's article on medical malpractice insurance rates, as well as articles on business and health insurance, focused on important issues facing us all. The articles, however, gave insufficient attention to some facts that deserve more explanation, and it left out a few important facts.
As the Wall Street Journal reported in April of this year, the entire insurance industry is now reaping the results of a decade of price slashing to recruit new customers, over aggressive risk taking and dependence on stock market earnings to cover losses on unrealistically low premiums. Those practices have converged with high natural disaster payouts (floods, hurricanes, tornados), the 9/11 bombings, the collapse of Enron and the decline of the stock market to create what the insurance industry calls a "crisis."
Insurance companies now want all of us to pay for their mistakes with drastically increased premiums. They are using the word "crisis" to dupe us into giving up many of our rights to seek compensation for our business losses and personal injuries. Just as with the same type of "crisis" in the 1970's and 1980's, insurers will be raising premiums while lowering their payouts, at the expense of injured people. The insurance industry is demanding that we "share the pain" of their own bad business decisions. However, never once has the insurance industry offered to "share the gain", for instance, during the 1990's when the industry was raking in record profits.
The insurance industry is playing an old shell game with the truth. Insurance consumers need to be aware of the added "costs" that come when the insurance industry says there is a "crisis." These costs will include, if the insurance industry has its way, so-called "tort reforms", which are, in truth, efforts to restrict or deny the ability of people injured by the negligence of others to hold wrongdoers legally responsible. Those efforts have already begun in Congress with so-called "reforms" of Medical Malpractice and Class Actions - efforts that will protect wrongdoers and insurance companies, and eliminate or limit injured persons' rights. This legislation, if passed, would result in no premium reductions. The truth about the medical malpractice "insurance crisis" may help to put this shell game in perspective.
Insurance companies are telling doctors and hospitals that huge malpractice jury verdicts have forced them to raise premiums for malpractice insurance, and even, in the case of St. Paul Insurance Company, to leave Montana. The truth is that St. Paul's decision actually has little to do with suits filed by injured patients and more to do with the insurance industry's business practices - including St. Paul's reported $100 million dollar loss on its Enron investments. The truth is that insurance companies still made money insuring doctors and hospitals for malpractice. From 1987 to 1997, malpractice insurers averaged a 21% rate of return in Montana and 15% nationally.
Contrary to the article's suggestion, there is no malpractice "crisis" in Montana. The truth is that in 2001 the lowest number of cases in the past seven years were filed with the Montana Medical Legal Panel. And, nationally, medical malpractice insurance premiums and claims paid represent only about 1% of total health care costs.
The Tribune's article cited a study by Jury Verdict Research which claims that the median amount for national malpractice verdicts have doubled to "$1 million." The truth is that this study is flawed and skewed. For instance, to arrive at the conclusion that verdicts have increased, the authors of the study had to leave out defense verdicts ($0 verdicts), verdicts in non-jury trials, or verdicts reduced or overturned on appeal in figuring their "median." Moreover, its conclusions are simply not true in Montana. Based on the insurance industry's own financial filings, the truth is that average actual payouts of medical malpractice claims have stayed virtually flat for the last decade, with payouts to injured people averaging around $30,000 per claim.
Montana has passed such medical malpractice "reforms" as a review panel before a suit may be filed and caps on non-economic damages - and those "reforms" have not lowered malpractice insurance rates. Our rates have risen at the same low rate as other states, even those without "reforms."
The truth is that we already have medical malpractice "reforms." The truth is that we have had no dramatic increase in either the number or value of malpractice cases. What is the truth about why insurers are raising their rates, again?
The truth is that insurance companies are using losses caused by their own bad investments to avoid responsibility and to profit at the expense of patients and consumers. The truth is that insurance companies are raising premiums because they made poor investment decisions and are now seeking a way to increase their bottom line. Increased premiums will do it. Creating a panic by raising rates and by claiming they are leaving a state will result in increased profits if they can get state legislatures and Congress to believe their claims and get laws passed to reduce payments to injured people. It's simple math being used by the insurance industry: increased premiums plus reduced payments on claims equals increased profits.
In April of this year the Center for Justice and Democracy released a report which showed that the insurance industry has a practice of misleading lawmakers and regulators about its financial condition, its commitment to the U.S. market and the reasons behind the volcanic eruptions of insurance premiums that lead to insurance "crises" for policyholders. Those "crises" have occurred three times in the last 30 years and are caused by the industry's own mismanaged underwriting and unchecked power. The study goes on to show that the insurance industry has even used the tactic of threatening to pull out of the United States, abandon a particular state or severely hurt a state's economy unless tort restrictions are passed, panicking lawmakers who then deliver whatever the insurers want. The result is profit at the expense of consumers.
Businesses, consumers and doctors need to look elsewhere for the reason for the rise in costs for premiums and health care in general - the cause is not insurance claims paid. The cause is the insurance industry's decision, and our elected representatives' past deference to this decision, to put excessive profit over truth.
Elizabeth Best, of Great Falls, is the President of the Montana Trial Lawyers Association.
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