Recent in-depth analysis by the American Medical Association has found that there has been a steady and significant increase in medical liability insurance premiums, as 30% of premiums in a survey of liability insurers reported a price increase.
This was the highest percentage since 2005, and the second year in a row there has been a significant amount of premiums with a year-over-year price increase.
“Premiums are increasing because the cost of claims (severity) is continuing to increase at what many believe is an accelerating rate,” said Rob Francis, executive vice president of ProAssurance. “The number of claims against the health care community has remained relatively stable for many years. A modest severity trend and the lower number of claims caused rates to go down. However, severity has now begun to increase across the country.”
ProAssurance estimates the average annual increase is about 3.5%, but it varies by state and is as high as 7% or 8% in some states.
“If the number of claims is the same and the cost of those claims increases seven percent in a state, the rates must increase that much as well,” Francis said. “Unfortunately, the longer pattern of claims means that carriers are usually behind in recognizing those trends meaning that more than one year’s worth of increase is needed.”
The percentage of premiums that increased has jumped from 17% in 2018, to 26.5% in 2019 and 31.1% in 2020. The AMA analysis identified 14 states that had a premium increase of at least 10%. Of the 14 states, eight are southern or Midwestern states: Kentucky, South Carolina, Maryland, Georgia, Missouri, Illinois, Texas and Virginia.
The AMA is concerned that the increased expense is a factor for doctors’ offices closing during a pandemic when their services are needed now more than ever. Another concern for AMA is the wide range of premiums based on geography. For example, OB/GYN physicians in Los Angeles had base premiums slightly under $50,000 while the same OB/GYN physicians in Miami had a base premium of over $200,000.
“Practice revenue has not fully recovered as the pandemic has stretched on and a protracted upward trend in medical liability premiums will threaten the viability of many practices that already face a difficult road to recovery,” said Susan R. Bailey, M.D., president of AMA.
Many states do not have any medical liability reforms, meaning that the cost of claims will increase at a predicted quicker pace than states with proposed reform legislation. Francis identified one state in particular that may have more pricing issues moving forward.
“Illinois is of particular concern,” Francis said. “Its severity is already very high and recent legislative direction seems likely to increase that significantly.”
7,578 Comments