Health Coalition on Liability and Access

Jim Fuquay, Fort Worth Star-Telegram
August 21, 2006

Three years after its passage, the Medical Malpractice and Tort Reform Act appears to finally be delivering on its promise to push down malpractice insurance rates in Texas, although the changes are relatively small.

According to the Texas Department of Insurance, physicians' malpractice rates are down an average of 19 percent since the bill went into effect Sept. 1, 2003. Also, more insurers have entered the market to offer coverage.

The act put a cap on noneconomic damages for pain and suffering and required a higher burden of proof in cases involving emergency medical treatment. Medical malpractice filings have plunged since it took effect.

"From the physicians' side, it's been more successful than our wildest dreams," said Bohn Allen, a retired Arlington physician and representative of the Texas Medical Association. He said doctors are happy that their malpractice insurance premiums are lower, but more importantly, they are again willing to perform higher-risk surgeries and practice in communities that had required particularly high malpractice premiums.

"Doctors feel less threatened by the tort system," Allen said.

Charles Bailey, general counsel at the Texas Hospital Association, said lawsuits against the association's 435 members are down sharply the past three years. The association represents about 85 percent of Texas hospitals, he said, about half of whom responded to surveys on the effect of tort reform, the most recent earlier this year.

Bailey said that in the state's fiscal 2003, before the new law went into effect, 1,922 lawsuits had been filed against member hospitals, roughly double the year before, Bailey said. In fiscal 2004, the number dropped to 540, he said, and in fiscal 2005 it dropped again, to 260.

"We think the reforms are eliminating some of the nonmeritorious claims," Bailey said.

He said hospitals' malpractice liability premiums are also experiencing a reversal, although not as sharp as the drop in lawsuits. After rising 23 percent in 2002 and 54 percent in 2003, he said, premiums fell 8 percent in 2004 and 17 percent in 2005.

"That's a significant turnaround in a relatively short time," he said.

Alex Winslow, executive director of Texas Watch in Austin, said those rate reductions, although welcome, pale in comparison to increases before 2003. Malpractice insurance is still overpriced in Texas and rates should continue to drop, he said.

Steve Simmons, vice president of sales for Medical Protective, the No. 2 malpractice insurer in Texas and No. 1 nationwide, said that although it's clear that the number of claims is declining, the industry will get a better picture of losses as cases filed under the new law are settled. He said that he didn't have an average malpractice payout amount from recently settled cases, but that "I suspect the average will go down. In two or three years, we'll get a more accurate picture of the impact."

He said Medical Protective has lowered its premiums three times, the latest July 1, for a total 13 percent reduction. According to the Texas Department of Insurance, that compares with a 92.5 percent rate increase between 1999 and 2003.

Despite the rate cut, Simmons said Medical Protective is losing business to new competitors in the Texas market.

Medical Protective was one of only four malpractice insurers who continued to write new policies in the state during 2002, said Jim Hurley, a spokesman for the Insurance Department. Hurley said that since 2003, more than 20 insurers have begun writing medical malpractice policies in Texas.