Medical Malpractice Insurance costs tend to vary among states and specialties. There are other factors that impact the malpractice insurance cost for healthcare providers. Location is a key factor impacting costs. In California, a doctor may pay over $5,000 for insurance whereas a surgeon in New York City may pay over $20,000 or even $100,000.
Coverage can also affect premiums. Doctors who want more coverage to cover multiple practices will pay more, as will physicians who need coverage across state lines. The malpractice insurance cost by specialty will also vary. Some specialties, such as orthopedic surgeries, are considered higher risk for insurance carriers, and premiums will reflect this.
How Has the Cost of Malpractice Insurance Changed Over the Years?
Medical malpractice insurance costs have varied widely over the years. In 2000, $7,604,104,289 in premiums were written nationally. That same year, 7,054,509,032 direct premiums were earned. In 2015, $9,393,109,307 in direct premiums were written, and $9,518,658,733 in direct premiums were earned.
The declining rate of medical malpractice claims has been linked to lower premiums. In 2003, there were 15,000 paid malpractice claims, and this number dropped to less than 8,900 by 2014, a decline of over 40%. During the same time, the amount spent on claims declined approximately 27%.
Payouts for medical malpractice lawsuits amount to less than 1% of total healthcare costs. Oftentimes, defensive medicine, a related but different phenomenon, accounts for more added costs than malpractice insurance.
Defensive medicine involves performing a high number of tests on patients, sometimes including unnecessary ones, to ensure that the medical team didn’t miss anything that could become grounds for a lawsuit. Together, defensive medicine and medical malpractice claims amount to about 3% of the $3.2 trillion healthcare costs across the country.
Summary of Cost for Medical Malpractice Insurance
Historically, there is a trend between states with higher medical malpractice insurance premiums and states with higher payouts. In California, the total payments were $1,226,137,150 while in Missouri they were $288,541,300 and in Nevada they were $11,268,000. These two states had lower payout than California.
Factors Affecting Medical Malpractice Costs
Many factors impact how much a physician will pay in medical malpractice premiums:
1. The State They Practice In
A medical practitioner in the same specialty and with the same experience will pay dramatically different premiums based on location. Part of this has to do with state laws. Different states have different tort laws, and those with the most vigorous tort reforms tend to have lower premiums. States have different regulations regarding limits on policies. Those requiring higher limits will result in higher premiums
Finally, each state has a different insurance climate. Those states with higher payouts may experience higher premiums, and those states with a more competitive insurance market may see more competitive rates. When wondering “how much does malpractice insurance cost?” doctors need to consider their location first. Even the county or city where a physician practices can impact annual premiums costs.
For example, Rochester Counties in New York have an average premium rate of $7,185 for internal medicine while Long Island internal medicine specialists can expect to pay $37,877 annually.
2. Their Field or Specialty
Malpractice premiums by specialty vary widely because some practices are higher risk. Specialties are divided and classified as no surgery specialties, minor surgery, and surgery areas. Obstetrics and surgery tends to see higher annual premiums than other specialty areas due to the higher risks of claims.
Professionals in these areas are more likely to incur medical malpractice claims and so see higher insurance costs. They may experience claims with higher severity and frequency. Orthopedic surgeons perform procedures that rely on a number of factors, including patient fitness, patient response to anesthetics and so forth. Many unexpected events can occur during such a surgery, and recovery may not be guaranteed.
If surgery on a spine results in an undesirable result, the effects on a patient can be long-ranging and severe, leading to a claim for a larger amount.
3.Physician’s History With Claims and Losses
Most insurers will offer better premiums for physicians with no claims made against them, simply because such professionals present a lower claims risk. Physicians who have not had any claims against them in the past ten years will get the best rates. Those who have had multiple claims in that same period will pay more and may even find it challenging to get an insurance policy.
4. Who Their Insurance Provider Is
Insurance providers in the same location will offer very different quotes, depending on their business model, overhead, application procedure and other factors. Physicians can work with an insurance broker to compare quotes from different providers. In many cases, this will yield a range of possible insurance costs and can help doctors find the most competitive rates.
5. Hours Worked by the Physician
Longer hours mean higher risk. Longer hours mean more patients seen and more treatments offered, which means a higher possibility of an unfavorable result. Very long hours can also impact effectiveness and may be linked to unforeseen results. Tired, overworked doctors may be more at risk for errors. As a result, physicians working less than 20 hours a week can typically see some reduced costs for their premiums.
This does not apply to surgeons, who are considered higher risk, even when working shorter hours, and they will likely see this reflected in their premiums as well.
6. Competition Among Insurers
When there are multiple insurance carriers vying for a market share of the state’s market, they will sometimes apply to the state Department of Insurance to file for lower premium rates to become more competitive.
7. Tort Reform
Tort reforms have been instituted in 33 states to address the growing costs of medical malpractice insurance and claims, especially since the 1990s. One area of tort reform that has received significant attention is non-economic damage caps in medical malpractice claims.
Non-economic damages in medical malpractice claims offer a dollar amount for the emotional distress, pain and suffering and other nontangible damages suffered by a plaintiff in a malpractice claim. Placing a cap on this amount can limit how much patients can pursue for these damages. Historically, caps have reciprocal effects on medical malpractice costs.
Once caps are overturned, medical malpractice costs tend to drop. However, states have differing results with this practice. Texas, Florida and Ohio all saw their medical malpractice costs decline after instituting caps. Louisiana and Massachusetts also have caps but continue to have high medical malpractice costs.
8. Policy Limits
Policy limits refer to the maximum amount an insurer will pay in the event of a claim. In medical malpractice insurance, the limit is split. For example, a $1,000,000/$3,000,000 limit will pay a maximum of $1 million per claim and up to $3 million for all claims during the policy term. The higher the policy limit, the more protection it offers and the larger the premiums.
9. Types of Insurance Providers
True insurance companies carry higher premiums but also offer greater financial stability and more robust policy provisions. Insurance trusts offer lower premiums but less financial stability and more limited policies. Both have a vital role to play in the medical malpractice marketplace, but the choice physicians make when selecting an insurance provider can have an impact on the premiums they pay.
10. Type of Coverage
Claims-made and Occurrence policies have different premiums. Occurrence policies, where available, are often preferred because they offer long-range coverage. If a physician pays for an occurrence policy and then ceases to pay that policy after a few years, they continue to be covered. If a claim occurs due to an event that took place while the physician was paying the policy, the physician is covered.
On the other hand, claims-made policies only offer coverage as long as a physician keeps paying. Once the physician stops paying the insurance policy, any claims made are no longer covered unless the physician purchases an Extended Reporting Endorsement for 100% or more of the mature premium. No tail coverage is needed if a policyholder moves between insurance companies with claims made coverage.
11. Defensive Medicine
Defensive medicine has been one reaction in the medical community to increasing numbers of medical malpractice claims. Physicians practicing defensive medicine may be ordering extra diagnosis tests, surgeries, treatments, prescriptions, referrals, hospitalizations and other options to avoid legal claims.
On the surface, this added diligence seems as though it should reduce malpractice claims by helping physicians notice and address any health concerns. However, defensive medicine can increase premiums. More medical treatment can mean more hours worked, which can mean larger premiums. In addition, each treatment or surgery can potentially increase risks, which can lead to increased claims history and then to increased insurance costs.
One survey of physicians in 2009 and 2010 estimated $650 - $850 billion is spent each year on defensive medicine. Blue Cross Shield estimated the annual amount spent to be $45.6 billion.
12. Variances in Practices
A physician who works across state lines, offers services in multiple facilities or has other unique characteristics may find their premiums affected by these factors. Each medical practitioner and facility is different, which is why such a range of insurance costs exists.
When speaking of the average cost of malpractice insurance, then, we can see that many factors can impact how much a doctor will pay for malpractice insurance. The cost of medical malpractice insurance by state, by specialty and by other factors will vary. When considering the average cost for malpractice insurance or when asking “How much does a doctor pay for malpractice insurance?” what most professionals are asking is “How much must I pay?”
If you are a medical professional in need of professional liability coverage, it can be useful to get a general sense of possible costs by examining the average cost of medical malpractice insurance by specialty and by looking at malpractice insurance rates by state. Ultimately, you will want to get a quote since your own costs may be very different than the average and may be significantly lower than the highest malpractice insurance premiums paid in your area.
In addition to the most common factors impacting premiums, there are many potential elements that could impact future costs for medical professionals. For example, some have suggested medical reforms to reduce instances of negative medical outcomes, thus reducing the number of incidents that can lead to medical malpractice claims. Some have suggested insurance reforms to impact how often insurers can increase premium rates.
Who Pays for Malpractice Insurance?
If you are a medical professional, you will need medical malpractice insurance. Your hospital or clinic may provide you with coverage. If you own a healthcare facility, you need to pay for medical malpractice insurance for your entity, your employees and yourself. Who will pay for coverage depends on your employment situation.
If you own a clinic or any healthcare entity, you are liable for the actions of your employees, and your entity may be vulnerable in case of any claim. You can also choose to require your employees maintain their own assets. If you have a solo practice, you will be able to share policy limits with entity coverage. If you are part of a health care group, the insureds in the group will generally have to pay insurance and the entity will also need to be covered.
Some employees, such as nurse practitioners, midwives and other professionals may need to pay an extra premium to secure individual coverage.
When looking at the average cost of malpractice insurance for doctors by state and other averages, consider who will pay for insurance and what the insurance will cover. An individual in a solo practice will be paying much different rates than an entity covering multiple employees.
Why Do Medical Malpractice Premiums Fluctuate?
Competition or lack of competition between malpractice insurance companies can affect malpractice insurance premiums. When a state has many carriers, competition can reduce costs. When companies consolidate operations, this can cause prices to eventually rise as competition decreases. On the other hand, when new companies emerge, this can create additional competition, and carriers may be pushed to offer lower premiums to compete.
The stock market impacts premiums as well by impacting insurance industry economics. Most companies in the insurance industry invest in the stock market to create profits. When the stock market drops, premiums increase as companies need to cover losses. Between 1998 through 2001, insurers experienced financial losses because interest rates on bonds fell and about 80% of insurers’ portfolios involved bonds.
During this same time period, competition in the market led some insurers to cover very competitive rates that ultimately did not cover their losses. As a result, some left the medical malpractice practice area while others become insolvent due to these market factors.
When insurers experience losses on claims, they also increase premiums. In Mississippi, between 1998 and 2001, insurers paid 142% more on paid losses annually, and this was linked to increasing insurance costs for medical professionals in that state.
One issue that impacts medical malpractice insurance providers is the comparatively longer time it can take to resolve medical malpractice claims. While the stock market can change almost overnight, medical malpractice cases can take years to settle. This can make the fluctuations in the malpractice market more significant.
In the 1970s, nonprofit insurance companies began to form in response to increasing premiums. In addition, as healthcare groups become consolidated and become large entities in their own right, some have chosen to exit the traditional insurance market and insure themselves or seek alternatives.
This can have a significant impact on the insurance market and can affect how competitive insurers remain, placing additional pressure on remaining insurers to compete for existing clients.
Many people think premiums have to do with malpractice case verdicts, but the costs physicians pay for insurance has more to do with investments. Companies invest the premiums they collect, and whether insurers make or lose money on these investments has a greater impact on premium rates.
Are You Wondering About Medical Malpractice Insurance Costs?
Chances are, you are not thinking about “how much do doctors pay for malpractice insurance?” and more considering how to keep your own costs in check. If you are considering how much you may have to pay for medical malpractice insurance costs, contact Gallagher Healthcare to find out how much you could save on premiums.
With a finger on the pulse of the insurance marketplace, Gallagher Healthcare can help you find customized solutions for your insurance needs. If you are ready to get a quote for medical malpractice insurance, contact Gallagher Healthcare today.