Lawyers want malpractice rates studied

Trial lawyers say the state's largest medical malpractice insurer is unlawfully charging doctors "excessive" rates.

At a news conference this afternoon, the N.C. Academy of Trial Lawyers called on state Insurance Commissioner Jim Long to conduct a hearing into rates charged by Medical Mutual Insurance Co. of North Carolina, which insures about 6,300 doctors statewide.

"It appears to us that they have crossed the legal threshold for having an excessive rate," said Dick Taylor, the academy's CEO. The academy argues that excessive rates are barred by state law.

For more than five years, the trial lawyers have engaged in a campaign to convince the public — and doctors, too — that the insurance companies, not malpractice lawsuits, are behind the rising cost of malpractice insurance. But until now the group hadn't questioned the legality of medical malpractice rates or asked the insurance commissioner to step in.

Today the trial lawyers unveiled an analysis by Jay Angoff, a lawyer and former insurance commissioner in Missouri, of Medical Mutual's financial condition and performance from 2001 to 2006. The study was based on data submitted to the state Department of Insurance.

Angoff said the amount of claims paid by Medical Mutual has been "very stable" from year to year "while premiums have gone way up."

As a result, the insurer's surplus — the amount it sets aside, over and above reserves, to pay future claims — has grown from $35.3 million in 2001 to $127.7 million in 2006.

"Surplus is a good thing, not a bad thing," Angoff said. "Companies should have a surplus. But there comes a point where enough is enough."

Angoff said Medical Mutual could cut its surplus in half and distribute about $60 million to policy holders and still have more surplus than the average medical malpractice company. That would amount to refunds ranging from $6,000 to $12,000 per doctor, he said.

Angoff said the state insurance commissioner has the authority to order refunds to policy holders if, after a hearing, the rates are ruled to be excessive.

Medical Mutual's general counsel, David Sousa, said it has become an annual event for the trial lawyers to bash Medical Mutual's financial performance.

"They always spin it the same way -- the medical malpractice companies are charging too much money, and therefore there's no reason for medical malpractice reform," he said in an interview before the trial lawyers' news conference.

Sousa said Medical Mutual was started by physicians 30 years ago and remains a physician-owned company, with each of its approximately 6,300 policyholders eligible to participate in electing the company's board of directors. "Why would the doctors charge more to themselves than they have to charge?" Sousa said. "It is just ludicrous."

Burton Craige, a former president of the trial lawyers group, said the N.C. Medical Society is determined to make lawyers and lawsuits the scapegoat for malpractice insurance rates. Consequently, it would be "inconvenient for the medical society and its political agenda" to blame insurers.

State insurance department spokeswoman Chrissy Pearson said in an interview before the news conference that regulators would give the report serious consideration.

But Pearson also noted that the trial lawyers' report had the benefit of hindsight.

Just because Medical Mutual's financials are strong doesn't necessarily mean that it charged excessive rates, she said, because rates are set to cover future claims. If the volume and value of claims are lower than expected, an insurer can end up sitting pretty even though its rates were justified at the time.

In addition, the state's ability to challenge medical malpractice rates isn't as clear-cut as its ability to govern auto, homeowners and workers' compensation insurance rates. "The statute is a little incomplete," she said.

Medical malpractice companies each year file their rate requests, which department actuaries review to determine that it meets the statutory requirements. "That is different from saying we approve it," Pearson said before the trial lawyer's press conference.

If the department's actuaries "see a rate that seems to be a littler higher than is actually justified," she continued, it will request that the malpractice insurer lower its rates.

"The companies will quite often do that," she said. "They don't have to do that."

"I understand in the last five years we have negotiated [Medical Mutual's rates] downward," Pearson continued, adding that she was seeking more details for the actuary who has been reviewing the insurer's rate requests.

State law does allow for a hearing if the department wants to challenge a malpractice insurance rate request, but the law doesn't specify how that hearing would be conducted, Pearson said.

One thing that is clear, however, is that — unlike the hearings the department conducts on auto and homeowners insurance rates — the burden would be on the state to prove that the rate request is excessive, she said.

That makes it "much more difficult to pursue a hearing," said Pearson. Indeed, the state has never held a hearing on medical malpractice rate, or on any other line of commercial insurance, she said.