Medical liability loss ratios on the decline in South Central states

Loss ratios in the medical liability line of insurance generally have been declining nationally for the past few years, and the South Central states of Arkansas, Louisiana, Oklahoma and Texas have not bucked that trend, according to figures released by the National Association of Insurance Commissioners.

In Texas, sweeping lawsuit reform was approved by the state’s citizens in 2003, which resulted in what some have called “the Texas miracle.” Proposition 12, among other things, capped at $250,000 lawsuit awards for non-economic damages in medical malpractice cases. Since its implementation, medical liability insurers have re-entered the market, rates have steadily decreased and physicians have applied for licenses to practice in the state in droves. The medical liability line in Texas had a statewide loss ratio of 157.66 percent in 1999; in 2006, the loss ratio was 46.49 percent.

Arkansas’ average loss ratio peaked in 2001 at 199.53 percent; in 2006 the medical liability loss ratio stood at 74.05 percent. Like Texas, the state’s general assembly passed lawsuit reform in 2003. HB 1038, known as the Civil Justice Reform Act of 2003, included a $1 million cap on punitive and non-economic damages, as well as joint and several liability and venue reform. It was approved in the House of Representatives by a vote of 71-29, in the Senate by a vote of 34-1, and was signed by Gov. Mike Huckabee on March 15, 2003.

Louisiana’s 2006 average loss ratio in the medical liability line was 47.24 percent, compared with 74.03 percent in 2005. State law mandates that claims against a physician must go before a medical screening panel before a lawsuit may be filed. Louisiana also has long had a cap on total damages, excluding future medical expenses, in medical malpractice cases of $500,000. That cap may be in jeopardy.

In September 2006 an appeals court said the cap was unconstitutionally low. When that ruling was appealed to the Louisiana Supreme Court, the higher court sent it back to the Third Circuit Court of Appeal on a technicality, saying the lower court had not ruled on the issues raised by the original lawsuit. The Third Circuit Court in July 2007 remanded the case back to the trial court to consider arguments on the constitutionality of the medical malpractice cap.

In 2003 Oklahoma’s average loss ratio soared to 276.90 percent. It has since declined to a low of 35.58 percent in 2005 and a still lower 19.25 percent in 2006. Despite the low loss ratios, the state suffers from a lack of health care providers, which lawsuit reform advocates attribute to a legal system that permits “jackpot justice” and the filing of frivolous lawsuits. The Oklahoma legislature passed a tort reform measure during the 2006 session but it was vetoed by Gov. Brad Henry. According to William H. Oehlert, MD, president of the Oklahoma State Medical Association, the “legislation was a comprehensive and meaningful effort to reform a broken liability system that drives physicians out of state, or forces them to drop much needed high risk care.”

2003 — a very good year

The year 2003 was a good one for advocates of tort reform. According to the National Association of Mutual Insurance Companies (NAMIC), new tort reform laws addressing appeal bonds, private attorney retention, class actions, the collateral source rule, intrastate forum shopping and jury service were enacted in 15 states that year. In addition, in 16 states tort reform bills were introduced into state legislative bodies that addressed joint and several liability, product liability, punitive damages, and prejudgment interest rates.

States that passed the most tort reform laws include: Colorado (9), Texas (8), Louisiana and Florida (7), North Dakota, Georgia and Michigan (6), Alaska, Arkansas, Idaho, Missouri, Montana, and Ohio (5).

NAMIC reported the majority of the reform laws passed address five key areas of tort reform: joint and several liability (35 states), collateral source rules and product liability (25 states each), non-economic damages (21 states) and punitive damages (18 states).