Item 3 Whether insurance costs for Vermont health care providers are rising while the payments insur

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Item 3Whether insurance costs for Vermont
health care providers are rising while the
payments insurers make for medical malpractice
claims are decreasing, and if so, why this
apparent discrepancy exists.
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Americans for Insurance Reform, Medical
Malpractice Insurance Stable Losses /Unstable
Rates 2004October 2004
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Focus of Study

• Have insurers charged premiums that are justified
  by their claims experience or is there another
  reason why rates have risen?
• Have tort system costs had a significant impact
  on overall costs for insurers and are they the
  reason behind rising premiums.

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Scope of Study

• Comprehensive study of medical malpractice
  insurance
• Compared premiums received by insurance companies
  against costs paid including jury awards,
  settlements, etc.
• Compared costs paid to number of doctors
• Covers 30 years through 2003
• Countrywide study

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Findings

• Inflation-adjusted payouts per doctor have
  remained flat since the mid-1980s and dropped
  from 2001 to 2003.
• There has not been a significant explosion in
  tort system costs

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Findings

• Medical malpractice premiums do not track the
  rate of medical inflation.
• Premiums appear to rise and fall coincident with
  the state of the economy.
• Medical malpractice insurance premiums rose
  faster in 2003 than was justified by insurance
  payouts.
• Major reason for premium increase/decrease is
  change in interest rates and investment returns

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Medical Malpractice Written Premiums Paid
Losses Per Doctor
Source Americans for Insurance Reform, Medical
Malpractice Insurance Stable Losses /Unstable
Rates 2004 October 2004
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Comparison of AIR Data to A.M. Best Data
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Sources Annual Statement 1998-2003 and
Americans for Insurance Reform, Medical
Malpractice Insurance Stable Losses /Unstable
Rates 2004 October 2004
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Source Annual Statement 1998-2003
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Vermont-Specific Experience
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Source Annual Statement 1998-2003 PHICO did
not report any loss data after 2000.
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Vermont Written Premium and Paid Loss

• PHICO stopped writing business in 2001.
• PHICO stopped reporting any experience after
  2000.
• Therefore, paid losses would be greater than
  displayed after 2000, while premium would be
  greater for 2001 only.

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Vermont Written Premium and Paid Loss

• There is no recognition of other underwriting
  expenses on the graph (typically about 15 of
  premium).

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Vermont Written Premium and Paid Loss

• Paid Loss and DCC do not include any provision
  for case reserves or for reserves on claims that
  have been incurred but not reported.
• E.g., written premium for 2003 is 16.6 million,
  and incurred (paid plus change in reserves) loss
  and DCC is 17.3 million for Vermont medical
  malpractice carriers.

Source Annual Statement 2003
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Summary

• Excluding PHICO, payments made by insurers do not
  appear to be decreasing in Vermont between 2001
  and 2003.
• Written premium increased between 2001 and 2002,
  then decreased between 2002 and 2003.
• Since 2001, it is not apparent that there is a
  discrepancy between decreasing payments and
  increasing insurance premiums in Vermont.

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Source Annual Statement 1998-2003
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