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Updated January 31, 2019
Healthcare reform and medical malpractice have become increasingly visible issues in the current political climate. Not all of that attention is a good thing: Most healthcare reform proposals that have been entertained by Congress include language reducing the ability of citizens to seek compensation for medical malpractice injuries.
Why? The popularly-accepted reasoning is that malpractice insurers, faced with an onslaught of medical malpractice claims in recent years, must increase the premiums they charge doctors to keep up with ever-increasing claims paid out to policy holders. In turn, healthcare costs across the country would rise.
However, data provided by the malpractice insurers themselves paints a very different picture. Numbers reported to the National Association of Insurance Commissioners revealed that the average profit of the top ten malpractice insurance providers was higher than an astonishing 99% of Fortune 500 companies.
In order to calculate future losses, insurance companies use a concept called incurred loss, which is an estimate of how much money will have to be paid out for future claims based on the number of claims made in the current and previous years. These initial estimates are revised in subsequent years as they are replaced by actual figures.
The data shows that profit estimates are routinely and significantly underestimated, while losses are consistently overestimated. Then, as the figures are revised over time, the losses are usually revised downwards to reflect the real figures, thereby increasing the overall profitability compared to the initial estimates. When losses are revised downwards, less money is paid out than initially estimated, resulting in a larger cash reserve for the insurer that collects interest over time before portions are paid out to settle claims.
Data from the 2004 annual statements of the top fifteen malpractice insurance carriers show that premiums continue to rise sharply year after year despite a lack of evidence that insurance companies are paying out increasingly larger or more numerous claims. Specifically, for the years 2000 to 2004, the top fifteen malpractice insurance carriers raised net premiums by over 120 percent, but claims increased by only 5.7 percent—leading to an increase in premiums 21 times greater than the increase in actual claims paid.
While these practices drive up the cost of healthcare for the average citizen as the industry passes costs to the consumer, doctors are also disadvantaged by these policies: Doctors must continue paying ever-increasing malpractice insurance premiums while insurance companies are routinely overestimating their losses and downplaying their profits.
As doctors burdened with sharply increasing premium costs and citizens pay higher and higher healthcare costs, malpractice insurance companies continue to show record profits. Despite their claim that the industry is in crisis, the malpractice insurance companies themselves report increased profits. If the numbers are accurate, they demonstrate that there is no evidence to substantiate the dramatic rise in malpractice insurance premiums we have seen in the last decade.
If you or a loved one have been a victim of medical malpractice, you are urged to contact the attorneys of Wilson Kehoe Winingham. An experienced Indianapolis medical malpractice lawyer at WKW can help you get the compensation you deserve. Call 317.920.6400 or fill out an online contact form for a free, no-obligation case evaluation.
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