Medical Malpractice Insurance Premiums

The medical malpractice liability system has been the subject of heated debate, the target of legal reform and the focus of empirical research that attempts to understand the system’s impact on medical malpractice insurance markets and a number of important outcomes. In addition to the direct effect on health care costs—premiums physicians pay for insurance are passed on to health care consumers—the liability system is thought to have a number of indirect effects, including impacts on physician location and treatment choices, changes in patient safety levels, and increased incentives for physicians to provide unnecessary medical care in an effort to avoid exposure to liability (i.e., defensive medicine) and to hide the circumstances surrounding patient injuries rather than to reveal and study them.

All empirical researchers who have studied medical malpractice insurance premiums or who have utilized premiums data to study questions related to the liability system or insurance markets have had to rely on datasets with severe limitations. Many have employed aggregate premiums collected by state, which make it impossible to separate the impacts of changes in quantity sold from changes in price. Since 1991, the Medical Liability Monitor (MLM) has tracked company-level prices for three different provider specialties, solving the problem inherent in the aggregated datasets. This dataset, however, includes prices on only one policy size per state (for most states, policies with a $1 million per occurrence limit and a $3 million annual aggregate limit). This limitation likely constrains our ability to draw general inferences from the results of empirical studies that employ the MLM data. Specifically, recent evidence suggests that physicians buy an array of different policy sizes (e.g., policies with per occurrence limits as low as $100,000). The factors that impact prices, such as tort reforms, likely have a disparate impact on the prices of these different policies. This limitation, along with others, demonstrates the need for a better dataset.

In 2012, the Searle Civil Justice Institute commissioned a project, which begins with the collection of premiums data from state filings by county, by policy size, by year, by insurer (including all those that make up at least 80% of the market in each coverage year-state), and by provider type (including a larger number of types than the MLM tracks). Once the dataset is complete, we will use it to generate the most comprehensive and accurate estimate to date of the impact of medical malpractice damages caps, the most popular flavor of tort reform, on insurance prices.

The design of the empirical study will be based on the results of a recent literature review (Zeiler and Hardcastle, forthcoming) that identifies a number of methodological problems with the existing literature, including the fact that the premiums datasets employed to produce estimates all come with severe limitations. Eventually the new database will be made publically available, and it will be used not only by those interested in studying medical malpractice insurance markets but also by others interested in insurance markets more generally.

The answer to the question whether and to what extent damages caps slow the growth of medical malpractice insurance premiums has far reaching implications. While premiums make up a relatively small portion of total provider practice expenses, and thus account for a miniscule portion of total health care costs, to the extent premiums act as a signal to physicians of liability exposure, high levels of perceived exposure might lead to increases in defensive medicine. Premium differentials also might explain why rural communities face provider shortages. At a time when the country is focused intensely on health care costs and access, the ability to accurately estimate the direct and indirect impacts of the liability system is essential. A more comprehensive dataset of medical malpractice insurance premiums will allow us to take a big step forward in the quest to better understand the liability system.

Principal investigators include:

  • Kathryn Zeiler, Professor of Law, Georgetown University Law Center