How Insurance Reform Lowered Doctors' Medical
Malpractice Rates in California
And How Malpractice Caps Failed
This report was prepared by The Foundation for Taxpayer and Consumer Rights. More information is availabe at www.consumerwatchdog.org
A 1988 California insurance reform initiative (Proposition 103), and not the state's 1975 malpractice law, is the reason California doctors' medical malpractice premiums have dropped and stabilized over the last 14 years.
In this report we demonstrate the following:
Insurance regulation, notliability caps, reduce rates
Thirteen years after the enactment of malpractice caps, doctors' premiums had increased by 450% and reached an all-time high in California.
Insurance reform Proposition 103 reduced California doctors' premiums by 20% within three years.
Insurance reform required medical malpractice insureres to directly refund more than $135 million to policyholders.
Three of the state's largest malpractice insurers--The Doctors Col, Norcal Mutual and SCPIE--refunded $69 million to doctors to comply with Proposition 103.
Malpractice caps result in a smaller fraction of premiums being used to pay claims and a higher percentage devoted to insurer profit and insurance defense lawyers.
During the first twelve years of California's malpractice law, insurers used 68.6% of doctors' premium to pay for profit, overhead and defense costs; only thirty-one cents of every premium dollar actually paid injured victims' claims.
California insurers now spend approximately 35% of every premium dollar fighting claims, while the national average is 21%.
Read the full report by clicking here.