The State of Medical Malpractice Insurance

The State of Medical Malpractice Insurance In Delaware FINAL REPORT March 18, 2003 Prepared by: Medical Liability Insurance Task Force Established by House Resolution Number Sixty-Six The National Scene with Respect to Medical Malpractice Insurance The Medical Malpractice Insurance Task Force, created by House Resolution No. 66, was established to review and study the availability of medical malpractice insurance in Delaware. The study was ordered after significant debate on the floor of the House of Representatives identified, but did not answer, a number of questions related to medical malpractice insurance, including whether there is a crisis of availability and/or cost of medical malpractice insurance in Delaware. Task force members included: The Chairman of the Delaware Health Care Commission designated by the Chairman of the Commission; the State Insurance Commissioner or her designee; two (2) representatives of the Delaware Trial Lawyers Association; a representative of the Defense Counsel of Delaware; a representative of the Medical Society of Delaware; a representative of the Delaware Healthcare Association; a representative of the Independent Insurance Agents of Delaware; a representative of the Delaware State Chamber of Commerce; one (1) State Representative appointed by the Speaker of the House of Representatives; and two people appointed by the Speaker of the House of Representatives, one of whom as named by the Speaker of the House to serve as Task Force Chair. The Task Force was given “the responsibility to address and review medical negligence insurance issues, and to consider measures not currently in Delaware Law, and thereafter provide recommendations to the General Assembly with respect to cost and availability of insurance for medical providers1.” The Task Force reviewed multiple reports and documents, and heard testimony from representatives of the insurance industry, local brokers and an actuary. Members of the Task Force also provided additional information. The Task Force also found it advisable to extend, several times, the duration of its consideration of the facts surrounding medical malpractice insurance issues in Delaware. These extensions were made necessary by the constantly changing circumstances both nationally and here in Delaware regarding availability, stability and affordability of medical malpractice insurance. These changing circumstances made consideration of the complex medical malpractice insurance issues more difficult and sometimes led to reconsideration of matters that had, in prior meetings, been tentatively resolved. Based on the testimony and information reviewed by the Task Force, it appears that, for the third time in the last three decades, there is a national medical malpractice crisis. Premiums for medical malpractice insurance have increased, many of the biggest insurance companies have withdrawn from the medical malpractice insurance market and others have declared bankruptcy or are under state regulatory supervision, and malpractice insurance has become unavailable at any cost in some states. Some doctors have left their home states for the friendlier environment of another. Others have stopped performing high-risk procedures or stopped practicing altogether. In a growing trend, some doctors who formerly practiced obstetrics and gynecology no longer deliver babies because the necessary insurance is too costly. 1 The term medical provider includes physicians and hospitals/health systems. Data on the hospitals/health systems includes coverage for salaried practitioners at the hospitals, hospital affiliated nursing homes, and home health agencies (where applicable). 2 Previous crises occurred in the early 1970s and the early 1980s. In the 70s, rising claims, inadequate rates and a falling stock market forced some private insurers to leave the market due to lack of profitability. That caused a crisis in availability and affordability for health care providers. Physician-owned insurers emerged in response to the lack of availability. After a half-decade of decreasing frequency and severity of medical malpractice claims and some tort reforms, a second crisis emerged. Significant rate increases, reduced reinsurance capacity and a return of high frequency and severity of claims led to an affordability crisis. Increased risk management efforts, including increased diagnostic testing and improved peer review, and another round of tort reforms (in states other than Delaware), combined with declines in both inflation and frequency of malpractice claims and the emergence of more provider owned companies, eased the crisis2. In the early 1990s, new companies entered the market, creating competition and stable and sometimes lower premiums. Because investment income for most of those companies was stable and strong, many companies set premiums that in hindsight were under priced premiums and that became a big factor as the decade continued. In the late 1990s, signs of the current crisis began to appear. The number of claims began rising again and insurance companies found themselves with inadequate reserves. In addition, the falling stock market contributed to the lack of bottom line profitability for insurance companies. Accordingly, they began to increase rates. Several of the companies that lowered premiums to capture market share earlier in the 1990s could not recover and either went out of business or left the market. Competitors had to quickly raise rates back to profitable levels. That has made finding affordable insurance more difficult for physicians, who, depending on their specialty, geographic location and history of claims, pay vastly different amounts for their insurance. Because of that, malpractice insurance premiums vary widely across the United States. Obstetrician/gynecologists, neurosurgeons, emergency room physicians and other highrisk specialties have been the hardest hit by recent premium increases. All these factors have led to questions of stability, availability and affordability in medical malpractice insurance nationally, regionally and here in Delaware. Stability Two important attributes that medical providers seek when purchasing malpractice insurance is the quality of the insurance company providing coverage and the long-term stability of that insurance company. Medical providers need the assurance that their insurance company will be there when a claim arises to pay claims and to defend them under all circumstances. On the issue of stability of the medical malpractice insurance marketplace, there can be no debate: there is a crisis of national proportions in the medical malpractice insurance market, and the fallout from that crisis is being experienced here in Delaware. This national crisis has lead to great uncertainty and turmoil among Delaware medical providers over whether the coverage they need will be available and has added to the issues surrounding the recent increases in insurance premiums. 2 Medical Malpractice – Financial Update Presented by: James D. Hurley, ACAS, MAAA, Tillinghast – Towers Perrin 11/06/02 3 The evidence presented to the Task Force is clear that dramatic changes are taking place in the medical malpractice insurance market. For a decade, beginning in 1985, that market in Delaware was relatively stable. Four of the top five insurance companies providing medical malpractice coverage to Delaware physicians remained the same. Medical Malpractice Insurers In Delaware Since 1985 (Source: Testimony of Larry Zutz 11/06/02) 1985 * PHICO * CNA * St. Paul * ICA (Insurance Corporation of America) * +DPIPG (Delaware Physicians Insurance Purchasing Group) +DPIPG began business in May of 1990. 1995 * PHICO * CNA * St. Paul * DPIPG * Princeton Each of these insurers was well known and was among the most respected by physicians, and each was rated relatively highly by the nationally respected rating agencies 3. Moreover, competition among these insurance companies kept rates relatively stable. Princeton, which rose to be one of the top five providers in Delaware during this 10-year period, is a subsidiary of the current number one medical malpractice insurer in the country, Medical Liability Mutual Insurance Company. From 1995 to 2000, a somewhat similar mix of insurance companies remained in the market, but the market began to experience the emerging presence of physician mutual companies. Whether through better market relations or better marketing of their products, these mutual companies began to make inroads in the Delaware marketplace. Medical Malpractice Insurers In Delaware 2000 and 2001 (Source: Testimony of Larry Zutz 11/06/02) 2000 * PHICO * St. Paul * DPIPG * Princeton 2001 * PHICO * St. Paul * DPIPG * Princeton 3 Insurance companies are rated by various expert reviewing agencies, such as A.M. Best, according to their solvency, investment strategies, underwriting abilities and according to other pertinent information relating to their insurance business. Generally, insurance companies are rated through a letter grade format, and those companies that are solvent and are not experiencing debilitating financial difficulties or approaching regulatory oversight status are graded on a scale from A++ to B-. Companies experiencing ratings falling below B+ are not generally considered by the insurance industry to be a prudent risk for any provider purchasing insurance. 4 * MIXX (Medical InterInsurance Exchange) * Fireman’s Fund * TDC (The Doctors Company) * Medical Protective * Frontier * MIXX * Fireman’s Fund * NCRIC * TDC * Medical Protective * Frontier * SCPIE From 2000, however, the national market for medical malpractice insurance has been in crisis. While a number of insurance carriers are licensed to issue medical malpractice insurance policies in Delaware, several insurers who had a significant portion of the market share in Delaware are no longer writing here, leaving the market place because of issues unrelated primarily to their Delaware experience, but related to a lack of profitability for this type of insurance nationally. A review of the recent experience of companies with the dominant market share that were writing insurance in Delaware illustrates the turmoil that reflects this market. PHICO, the long time medical malpractice insurer in Delaware has gone bankrupt (this in itself adds immensely to the concern of the physicians and colors the entire situation). Princeton, as a result of an internal strategic corporate business decision, is no longer writing medical malpractice insurance anywhere in the United States other than its home state of New Jersey and through September 1, 2003 in Delaware. MIIX is no longer writing new insurance and is in runoff. Fireman’s Fund is, as a result of internal corporate business decisions, no longer writing medical malpractice insurance. As the Task Force learned during its review, not one of the insurance companies that have left or limited its exposure to the Delaware market did so because of any business experience in Delaware. All of the carriers left for reasons unrelated to their Delaware experience, and none, no matter what Delaware did or had in place, would have stayed or, as the Task Force learned, would return. Today, while medical malpractice insurance is still available, it is generally from physician mutual insurance companies and purchasing groups that are often not rated as highly as the traditional insurance companies, and whose long term prospects, from the physicians perspective may not be as solid as the traditional and long established insurance companies. Alarmingly for many medical providers, because of the way in which these national problems and business decisions by the insurers arose, a medical provider in Delaware may have had the unfortunate experience of having had to seek new coverage through a new insurance company two or three times during the last four years, thus heightening the concern regarding this issue. The pending withdrawals of Princeton and Fireman’s Fund from the Delaware market have had a profound impact on medical malpractice insurance coverage in the state. Testimony from two Delaware insurance brokers indicated that upwards of 1,100 of the state’s approximately 1,800 practicing physicians will be required to find a new carrier of medical malpractice insurance sometime during the first four to six months of 2003. In the first quarter of 2002, both carriers announced their intentions to withdraw from the Delaware market by the middle of 2003. 5 The market, as of the end of 2002, therefore, has dramatically changed from the last several years. Traditional insurance companies are virtually gone, and what remains is a market dominated by physician mutual insurance companies. Delaware Medical Malpractice Insurance Companies and Groups Writing New Business (Source: Kevin Brady 01/22/03) Insurance Companies GE Global Insurance Group GE Medical Protective Company Doctors Company Insurance Group *Preferred Professional Insurance NCRIC, Inc. Commonwealth Medical Liability SCPIE Insurance Group American Healthcare Indemnity AM Best Rating A+ Superior AM Best Financial Size XV 2 Billion + WEISS Rating B Good WEISS Reserve Adequacy Excellent WEISS Profitability Excellent WEISS Liquidity Excellent WEISS Stability Good A Excellent IX 250-500 Million VI 25-50 Million VI 25-50 Million B Good Excellent Fair Excellent Fair AExcellent AExcellent C Fair C(Fair) D+ (Weak) C(Fair) C(Fair) Good Fair Excellent Fair Excellent Good Good Weak Excellent Excellent Fair Weak B+ Very Good VIII 100-250 Million Excellent Good Weak Fair Good Excellent Fair Fair Risk Purchasing Group/Insurance Companies CNA Casualty **DPIPG DEL-PRO A Excellent XV 2 Billion + C Fair Fair Weak Good Fair Risk Retention Group ***Preferred Physicians Medical RRG B+ Very Good V 10-25 Million D+ Weak Fair Fair Excellent Weak 6 * Only available to physicians who have a substantial portion of their practice at St. Francis Hospital. ** Both DPIPG and DEL-PRO do not have ratings per se. They fund the deductible up to $900,000. The ratings shown are for CNA as the issuer of the policies. *** Coverage restricted to anesthesiologists only. Within broad parameters dictated by the Insurance Department, insurance carriers set their own terms and underwriting policies, and each has or may have vastly different policies concerning their ability to take on additional insureds, their desired mix of practice areas within the medical profession and their tolerance of claims history of physicians. Subject to that caveat, however, there appears to be no less than four insurance companies or groups broadly providing medical malpractice insurance coverage in Delaware and who are generally acceptably rated, namely: Medical Protective, Doctors Company, NCRIC and DEL PRO. Thus, as discussed in detail below, medical malpractice insurance is still available, but it is from insurers that are new to the physicians, whose long-term prospects are less certain and whose track record for service is not known to the physicians. Moreover, among some of those others who are still writing in Delaware, their ratings have been downgraded. Availability Given the turmoil in the medical malpractice insurance market -- the withdrawal or bankruptcy of several of the long-time preeminent medical malpractice insurers in the Delaware marketplace – the Task Force was concerned with whether there was ample medical malpractice insurance available to Delaware medical providers. As disclosed during testimony provided to the Task Force, 1,100 of the approximately 1,800 physicians in Delaware will be obligated to find a new insurance carrier during the first six months of 2003. The Insurance Commissioner, when apprised of this potential problem, interceded and obtained an extension from Princeton such that approximately 50% of the approximately 350 physicians currently insured with Princeton would be able to renew with Princeton prior to September 1, 2003 so that they would not be required to seek a new insurance carrier for insurance for the upcoming coverage year. Subsequently the Task Force has learned that 70% of the Princeton insured physicians have been placed with other carriers. These changes were motivated by the decline in Princeton’s rating from B+ to B. Medical malpractice insurance is a highly specialized insurance business, and a handful of exceptionally dedicated insurance brokers are engaged in underwriting insurance coverage for the benefit of Delaware physicians. These brokers have been working diligently during the last year in attempting to seek out and provide replacement insurance for physicians who have been covered by Princeton and the Fireman’s Fund. The brokers, however, differed widely on the how many physicians may have a difficult time obtaining medical malpractice insurance replacement coverage. As a result of the successful and dedicated work of the brokers to place physicians with a new carrier, at least one broker revised his estimate during the short process of the Task Force’s consideration of this issue. In that regard, as of the date of this Report, based on the best information available, one broker revised his estimate downward, predicting that approximately 106 to 185 of the 1,100 physicians would have difficulty finding replacement 7 coverage, and another modified his earlier prediction, estimating that the number of physicians that will have difficulty finding a replacement carrier would be greater than the 20 to 30 previously estimated, provided, however, that all physicians would investigate all options available to them through each of the brokers here in Delaware. The testimony from the agents agreed, however, that these remaining physicians who will be experiencing difficulty finding a new medical malpractice insurance provider are those who have a record with respect to the number of claims, number of settlements or the amount of settlement(s) or verdict(s). According to the agents, these physicians will be, as they usually are, always among the most difficult to place, and moreover, due to the nature of their medical practice areas, these physicians tend to be among those practicing in those among the higher risk specialties, including OB services and other specialized surgical procedures. Nevertheless, these physicians will not be going without insurance. Assuming that these physicians cannot obtain insurance through one of the seven remaining insurance providers operating in the State, insurance coverage is still available to these physicians through the excess and surplus lines. This coverage, offered by traditional and highly reputable excess insurance coverage companies, is available to all physicians, but because of its dramatically higher cost, is rarely used by physicians. Similar to the high risk coverage available to motorists who have a tarnished driving record, the excess and surplus lines coverage is available at an unrestricted market rate, which according to the agents, may be as much as between three and five times the current rate being paid by the physician. (Addressing the cost of coverage for these physicians who have a high claim/incident record is beyond the scope of the Task Force’s role in addressing the medical malpractice insurance issues surrounding the nationwide insurance crisis and its effect on the Delaware market). The testimony from the agents also agreed that a market the size of Delaware would best be served by between two and four stable, highly rated and respected insurance companies. With respect to the seven that are currently writing insurance in the state, two of them have the largest market share nationally, and at least four have ratings that place them in the upper range of insurance carriers and are no less comparable to the insurance provider coverage that has withdrawn from the Delaware marketplace. The Task Force received testimony that two hospitals/health systems have been having difficulty obtaining replacement medical malpractice insurance providers for their insurance carriers that have withdrawn from the Delaware market. As of the date of this Report, both of these hospitals/health systems have been unable to find replacement coverage for policies that will be expiring this Spring. Availability, however, cannot be considered in a vacuum. While it appears that insurance availability in Delaware has not reached a crisis point, the question remains “at what cost is insurance available?” Insurance may be available, but if its cost is so excessive that it is unacceptable to physicians, then there is a question of whether insurance is, in fact, “available.” Furthermore, as the Fireman’s Fund and Princeton insureds attempt to replace their coverage, some may find that they are unable to obtain coverage at a price that will permit them to continue to practice. 8 Affordability The Task Force was provided credible evidence that the cost of medical malpractice insurance has risen, and that these cost increases have been substantial in all medical practice areas since 1999. As the following chart demonstrates, the average cost of insurance over the last five years has increased dramatically across the board: Internal Medicine General Surgery OB/ GYN Emergency Physicians 1998 $4,023 1999 $4,286 7% increase $15,298 5% increase $34,109 6% increase $14,120 93% increase 2000 $5,797 35% increase $22,941 50% increase $48,877 43% increase $15,608 11% increase 2001 $6,783 17% increase $26,912 17% increase $58,263 19% increase $21,440 37% increase 2002 $7,054 4% increase $27,836 3% increase $59,200 2% increase4 $26,080 22% increase5 $14,535 $32,108 $7,325 The rates prior to 2001 reflect the practice of insurance carriers in Delaware typically offering physicians up to a 25% credit on the average rates. Because that practice was discontinued in 2002, the rate of increase between 2001 and 2002 rates is higher than over previous years. Additionally, significant cost increases for malpractice insurance have been experienced by Delaware’s hospitals/health systems between 2001 and 2003. Premium costs have increased as much as 112 percent, and in other cases, deductibles have increased as much as tenfold for the same time period.6 The question is whether medical malpractice insurance rates have reached those limits such that they will cause or are causing an adverse effect on the patients -- the citizens of the State of Delaware -- through the unavailability of certain specialties, through the out-migration 4 Medical Liability Monitor 1998-2002 Rates are for $1 Million / $3 Million Limits and are for physicians who have an unremarkable claims history. 5 Information on emergency physicians provided by Dr. Leonard Nitowski. 6 Cost data for hospitals and health care systems is based on information provided to the Delaware Healthcare Association by its members for the policy years 2001 through 2003. The data includes premium costs and the increases in deductibles for this three-year period. According to these providers:  The premium changes for commercially insured coverage ranged from the lowest of 102 percent increase to the highest of 112 percent increase for those facilities that made no change in the amounts of their levels of coverage or their deductibles.  For those facilities that made significant changes to their deductibles, the premium increases either remained constant or increased as high as 190 percent. For example, one facility had to increase its deductible tenfold to maintain its premium for policy year 2003 from the previous policy year, while another facility doubled the amount of its deductible in policy year 2003, but its premium still increased by 190 percent between policy year 2002 and 2003. These facilities retained their same limits of coverage during the three fiscal years reported. As a result of these increases it appears that some hospitals/health systems are becoming “self insured” for lower limits of coverage or are on the verge of doing so. 9 of physicians, through the failure to attract new physicians into the State or by a reduction of services by medical providers. Notwithstanding these increases, the evidence received by the Task Force demonstrated that, with the exception of obstetrics, medical malpractice insurance rates have -- to date -- not risen to levels that impact patients adversely. Average rates in Delaware for general practitioners are much lower compared to average rates in surrounding states.7 Average rates for the higher risk specialties in Delaware, while much higher than for general practitioners, are at least double in Pennsylvania. Moreover, the average rates for these high risk specialties are far below those rates being experienced by physicians in certain areas in Pennsylvania that have seen those physicians stop practicing, engage in a work stoppage or close emergency medical facilities. Not only does the comparison rate data support the conclusion that the medical malpractice insurance rates have not reached the adverse impact level, but the actual evidence of physician behavior supports this conclusion as well. Evidence gathered by the Task Force demonstrates that rather than leaving the state, physicians continue to move here, whether right from their residency or from states that are experiencing insurance coverage problems. Moreover, the Task Force was provided with no evidence that there is any unusual out migration of physicians or that there has been any reduction of services by medical providers. Finally, with the exception of obstetrics services in Kent and Sussex Counties, the Task Force received no evidence that there has been any reduction in specialties available to Delaware patients. Increased medical malpractice insurance rates are, however, having other less direct, but distinctly negative consequences. The rates being experienced by medical providers are at an all time high, and no quarter of the profession has been immune from these increasing rates. Due to the byzantine structure of restrictions in medical reimbursements from Medicaid, Medicare and health insurers, medical providers are unable to pass along the cost of these increases by raising their rates, thereby leaving medical providers in the unenviable position of having to absorb the increased costs themselves. Furthermore, the Task Force understands that if costs go up and reimbursements do not allow for increases to capture those cost increases, then, all things being equal, other things must suffer as a result. Needed medical infrastructure improvements, medical equipment purchases and professional staffing have all begun to be deferred and/or reduced, with the concomitant loss to medical consumers, the citizens of the State of Delaware. Thus, while no adverse impact as defined above is evident, it is beyond cavil that this spiraling increase in insurance rates is having negative implications for the provision of quality health care service in Delaware. Discussion As has been noted and as an actuary informed the Task Force, insurance companies make most availability and rate decisions on a regional basis and the record in Delaware, whether 7 For comparison purposes only, rates must be discussed for doctors in good standing and with a relatively good claims history. Physicians, who have a claims history, have rates that are significantly higher than the average rates. Those rates cannot be compared given the differences among specialties, practice areas and claims histories. 10 good, bad or indifferent, has little impact on the level of medical negligence insurance rates and availability for Delaware health care providers.8 What then does the region9 look like in those areas that have relevance to the issue of insurance availability? The Task Force received data for Delaware showing that settlement amounts (Chart 1) and number of closed cases (Chart 2) for January 1990 to December 2002. These charts show higher settlement amounts in the years 1994-1996 and 2000. The number of cases in 1994-1996 is about the same as other years while 2000 is significantly out of register. While there is some concern that these reports may not be complete due to a reluctance or failure to report all incidents, it is Delaware specific data that needs to be considered. However, these data do not closely correlate with malpractice insurance premium rates. The number of cases and settlement amounts in 2001 and 2002 were not higher than the norm over the last 13 years. There certainly does not appear to be a trend of higher settlement payments and of more cases that one might expect given the rise in medical malpractice premium rates. This underscores the information the Task Force received that Delaware premiums are a function of costs in the region10. Confirming that Delaware is in the middle with respect to the malpractice issue, the American Medical Association (AMA) stated that it had identified 18 states “in the throes of a medical liability crisis.”11 Among these states are New Jersey, New York, Pennsylvania and West Virginia. These states are part of our region and impact how Delaware health care providers are treated. Maryland, Virginia, District of Columbia and Delaware were listed as states showing problem signs, but not in crisis. These data demonstrate that Delaware is not currently in a crisis from the number or amount of settlements within the State. It shows that the Task Force cannot conclude from the data that there is a relationship with performance, availability and cost. However, availability and cost are being impacted because of decisions made by the carriers based on regional performance or business decisions to cease writing malpractice insurance. This shows that, while Delaware ranks favorably, the weight of its neighbors, particularly their size in comparison to Delaware, any change made will have a limited impact on rates charged locally. Until recently, Delaware medical providers had not experienced the same problem with availability and cost as in the region, particularly Pennsylvania, New York and New Jersey. This may not continue unless states in our region take action to insure reasonable availability. If our neighbors continue to experience escalating judgments and increased frequency of claims, insurance carriers may undoubtedly make the business decisions that may limit coverage to the region including Delaware. 8 Testimony from James Hurley, Consulting Actuarial, Tillinghast-TowersPerrin before the Task Force on December 4, 2002 9 The Task Force defines the region as Delaware, Maryland, West Virginia, Virginia, New Jersey, Pennsylvania, New York and District of Columbia. 10 NAIC data for years 1991-2000 for medical malpractice insurance profitability as demonstrated by the loss ratio and rate of return are the most favorable for Delaware. No data is available for the last two years. 11 AMA Press release March 3, 2003. 11 As shown above, the Task Force has been frustrated by inconclusive and sometimes conflicting data relative to availability. Delaware statistics show that Delaware is better than most states, but the pool of physicians is too small to influence carrier decisions regarding availability and cost. The withdrawal of carriers impacting 1,100 physicians was of concern and initially showed that Delaware might be headed for crisis. Subsequent testimony moderated this view. Another concern requiring attention is the decrease of availability and the escalating cost for high-risk specialties such as obstetrics, orthopedics, neurosurgery and emergency department physicians. In addition, the Task Force finds that Kent and Sussex Counties are being underserved. The blame for this cannot be laid totally at the feet of insurance rates. There has traditionally been a problem in attracting practitioners in these areas. Conclusions This Task Force has received testimony from a noted actuary, an insurance company executive whose company writes malpractice insurance in Delaware, several Delaware brokers plus the insight and viewpoints of Task Force members. The Task Force was well represented with healthcare providers, both physicians and hospitals/health systems, defense and trial attorneys, Department of Insurance, the Health Care Commission, a State Representative and the Chair. This diversity and expertise added immeasurably to the discussions and the following conclusions. Despite that diversity and expertise, the Task Force discovered that the medical malpractice insurance industry was constantly changing as carriers get downgraded or leave Delaware, forcing some physicians to search for new carriers and affordable rates on a seemingly frequent basis.  Availability - The Task Force received significant information in the area of availability. While a large number of medical providers face obtaining insurance from a new insurance carrier this year, it is clear that all providers will be able to get necessary coverage. With the presence of at least four carriers, two of which are the largest nationally in market share, the prospect for continued availability seems relatively assured.  Affordability - The comparison of the rate data available to the Task Force leads it to the conclusion that the medical malpractice insurance rates have not reached the adverse impact level although significant increases are being experienced. In addition, the Task Force received no evidence of unusual out migration of medical providers or that there has been any reduction of medical providers. However, it is the case that some physicians may modify their practice or resort to costly coverage through excess lines of insurance. It is clear from testimony that Delaware’s insurance rates are impacted mainly by regional performance, not Delaware’s. Stability – There has been significant turmoil in past years with the loss of several large underwriters. This has continued recently with the decisions of Princeton and Fireman’s Fund to withdraw from Delaware. However, testimony shows that  12 Delaware has sufficient capacity with its current carriers, two of which are the largest nationally in market share. If market trends continue, however, this may not be the case in the near future.  Regional Situation – Delaware performance is relatively good in comparison to the region, but carriers make their underwriting decisions based on regional and, perhaps, national results. Pennsylvania, West Virginia and New Jersey are in crisis. Statewide walkouts by medical providers were avoided in Pennsylvania and West Virginia, but New Jersey withheld all but emergency services beginning on February 3rd and lasting more than a week. This resulted in a spirited public debate and increased interest in the legislature with numerous solutions proposed, mostly involving some form of caps. To date, no definitive action has been taken. It is agreed that action in Delaware will not have a major impact on availability and cost in the short term. The long term requires that Delaware closely monitor the actions taken in the region as to their applicability to Delaware. High Risk Specialties - There is substantial evidence that the availability for high-risk specialties, specifically obstetrics, in Kent and Sussex Counties, are a significant problem. Specific action needs to be taken to improve coverage in these counties. Board of Medical Practice – The Board of Medical Practice needs a more effective system in place to monitor performance and insure that appropriate action is taken against repeat offenders where a pattern of negligence is established.   Recommendations The following are the recommendations of this Task Force to the Delaware General Assembly per House Resolution # 66:  The Task Force had considerable discussion on the issue of instituting a cap on noneconomic damages in medical malpractice lawsuits. There was significant disagreement on the subject and extensive testimony and documentation was considered. The data that the Task Force reviewed indicated that Delaware does not have a problem with excessive medical malpractice awards and settlements, which is what a cap is intended to correct. Further, the testimony of an actuary made it clear that such a cap would not reduce medical malpractice insurance premiums in the short term and may or may not have the intended effect at all because Delaware rates are on a more regional basis. Additionally, the institution of such a cap would have to be balanced against the loss of compensation for individuals hurt by medical mistakes. 13 However, the Task Force acknowledges that there is an argument for such a cap as a business incentive to attract insurance carriers to Delaware that are not currently offering medical malpractice insurance to the state’s medical providers. Accordingly the Task Force believes that the decision on whether or not to propose a cap on non-economic damages in medical malpractice lawsuits is a political decision that is best weighed by the members of the General Assembly.  The General Assembly should adopt legislation with the intent that all health care negligence suits filed shall be accompanied by a Certificate stating that there are reasonable grounds to believe medical negligence has occurred. If a Certificate of Merit has not been offered at the time of the filing of the Complaint, then the statute of limitations shall toll for sixty (60) days with no prejudice to either party. No responsive pleading is required by the defense until sixty (60) days after service of the Certificate. If within the sixty-day (60) period the Certificate has not been filed, the suit shall be dismissed with prejudice. Upon motion by the plaintiff, and with good cause shown, the Court may grant plaintiff an additional sixty (60) days to file the Certificate. The Certificate of Merit shall also define an expert.  The Task Force also discussed two additional issues:   The elimination of joint and several liability, and Making the periodic payment of awards and settlements in medical malpractice cases mandatory. Since there was no testimony provided on these issues related to the availability, affordability and stability of medical malpractice insurance in Delaware, an agreement could not be reached by the Task Force. It is further concluded that the elimination of joint and several liability is a political decision that is best weighed by the Delaware General Assembly.  The Department of Insurance states that the absence in Delaware of 5 of the top 20 insurance carriers is based on pure business judgments because of the lack of geographic proximity or the small potential market already served by other companies. The Insurance Commissioner’s Office should actively continue to contact strong carriers to encourage them to consider underwriting in Delaware. The Delaware Bar Association, the Delaware Health Care Association and the Medical Society of Delaware consider the need for and the desirability of promoting arbitration of health care negligence suits. Delaware should closely monitor reforms initiated in other jurisdictions in our region to insure that Delaware stays in good register. Changes to Delaware law should be considered where needed to be compatible with the region.   14  The Congressional Delegation should be encouraged by both the Executive and Legislative branches in Delaware to make dealing with this issue a top priority in the current session of Congress. Delaware should establish a mechanism to insure availability of obstetrics services in Kent and Sussex Counties. This should include continued funding of the Student Loan Repayment Program administered by the Healthcare Commission. The General Assembly should consider if direct subsidy of medical liability insurance premiums, particularly high-risk specialties, is an appropriate use of Healthcare Fund money (tobacco settlement). The General Assembly should create a Commission to study, review and, if necessary, propose the reforms that may be needed to improve and promote patient safety including the ability of the Board of Medical Practice to oversee the quality of care to patients and to ensure a high level of patient safety. Such Commission should consider the necessity of instituting a dedicated stream of funding to ensure that the Board has the resources to fully and completely carry out its oversight functions. The General Assembly should create a Commission to study, review and, if necessary, propose the establishment of a Delaware medical provider based mutual insurance company. The General Assembly, through the Joint Sunset Committee, or through some other appropriate agency or committee, should determine whether the Insurance Department is the appropriate state agency to collect, gather and disseminate data regarding the number of medical malpractice claims and settlements and the amounts of the settlement of such claims against medical providers. This inquiry should also consider (i) an appropriate mechanism to ensure that an enforcement procedure is created such that all parties with a duty to report, medical providers, insurance companies and other third-parties, make such reports, (ii) whether the amounts of jury verdicts and jury conclusions should be reported by the Courts or the litigants, and (iii) how all such data should be aggregated and, thereafter, publicly disseminated or made publicly available. The General Assembly should consider legislation that would direct the creation of a definitive standard or guideline, as appropriate, by which to compensate an injured person for pain and suffering. These standards should be made part of the instructions to the jury. This would be in line with the standards now in place in determining economic damages. A panel of medical, judicial and legal experts should be convened to establish these standards. Delaware should investigate an Interstate Compact to determine if this approach has benefit. Under this concept, Delaware would join with other states to form a consortium to develop and institute those reforms that will impact availability and affordability.       15 Medical Malpractice - Settlement Amounts for Jan. '90 - Dec. '02 Chart #1 21,000,000 18,000,000 15,000,000 12,000,000 9,000,000 6,000,000 3,000,000 0 Full Settlement Company Settlement Amount 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 4,786,24 8,375,32 9,267,39 7,445,54 18,854,8 17,165,9 18,028,3 5,072,70 2,899,69 10,271,9 19,255,3 8,521,65 8,830,18 6 4 5 9 41 65 13 7 8 67 14 2 1 4,665,92 5,129,09 6,157,04 4,841,89 8,421,90 8,952,64 9,643,81 4,364,30 2,427,69 8,796,96 10,213,3 8,443,65 6,590,68 4 1 5 1 9 0 3 8 8 7 14 2 1 Year Medical Malpractice - Number of Closed Cases from Jan. '90 - Dec. '02 Chart #2 # of Closed Cases 220 200 180 160 140 120 100 80 60 40 20 0 # of Closed Cases 1990 199 1991 97 1992 96 1993 118 1994 109 1995 138 1996 119 1997 113 1998 115 1999 127 2000 182 2001 97 2002 84 Year 16 12 12 These charts do not include cases on appeal. 2002 reporting is not complete due to March 2003 reporting requirement date. 17 Report of Task Force Sixty-Six. Submitted to the Delaware General Assembly on March 18, 2003. Respectfully submitted, __________________________ Task Force Chair – Gilbert H. Smith, Jr. Members: Gilbert H. Smith, Jr., Community Member (Task Force Chair) Lieutenant Governor John C. Carney, Jr., Chairman of the DE Health Care Commission Insurance Commissioner Donna Lee Williams, DE Department of Insurance Representative Robert J. Valihura, Jr., State Representative 10th District Leonard A. Nitowksi, MD, Community Member Bart Dalton, Esq., Delaware Trial Lawyers Association Bruce Hudson, Esq., Delaware Trial Lawyers Association Stephen R. Permut, MD, JD, Medical Society of Delaware Richard Galperin, Esq., Defense Council of Delaware Frank Wharton, Independent Insurance Agents of Delaware Joseph M. Letnaunchyn, Delaware Healthcare Association A. Richard Heffron, Delaware State Chamber of Commerce Staff Assistant: Rodney N. Brittingham, Legislative Assistant Delaware House of Representatives For any questions or additional information concerning the Task Force, please contact Rodney Brittingham at (302) 577-5246 or e-mail: rodney.brittingham@state.de.us 18