Here is what just happened in Texas. The insurance companies got the Republican legislature to amend
the Constitution to cap damages at $250,000 in order to prevent an insurance "crisis". Guess what?
The insurance companies are stalling, and rates are still going up!!!
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Austin American-Statesman Sunday, January 25, 2004
Malpractice insurance rates slow to fall Insurers say raft of last-minute lawsuits prevented quick
rate cuts.
By David Pasztor AMERICAN-STATESMAN STAFF
More than four months after voters narrowly approved a controversial change in Texas law that is
supposed to lower medical malpractice insurance costs for doctors, most of the state's physicians
have not seen their insurance rates go down, and some may face increases.
The state's largest malpractice insurer, the Texas Medical Liability Trust, has lowered rates 12
percent for about 11,000 of the state's 38,000 doctors. Other companies are either holding rates
steady or have requested rate increases as high as 35 percent from the state Department of
Insurance.
Supporters of Proposition 12, a constitutional amendment that placed a $250,000 cap on noneconomic
damage awards such as pain and suffering in medical lawsuits, say it's still far too early for the
law's full effect to play out.
Perhaps so, but the early signs are not encouraging, said Dan Lambe, executive director of the
nonprofit consumer group Texas Watch, which spearheaded opposition to the amendment.
"Promises were made, legal rights were sacrificed, the Texas Constitution was rewritten to appease
the insurance industry . . . and someone has to answer why we're not seeing relief," Lambe said.
Blaming frivolous lawsuits for rapid increases in malpractice insurance premiums, Gov. Rick Perry,
other Republican leaders and the Texas Medical Association threw their political weight behind the
amendment. It passed in September with 51.13 percent of the vote.
Rising malpractice rates were driving doctors out of Texas and limiting the availability of medical
care, supporters argued. The cap on damages would cut down on lawsuits and enable insurance
companies to lower rates, they said, by eliminating the fear of multimillion-dollar jury awards for
such damages as mental anguish and disfigurement.
The caps do not apply to economic damages, such as lost wages and medical costs.
The Medical Liability Trust, a nonprofit insurer that last year promised it would lower rates if the
amendment passed, did so on Jan. 1, said spokeswoman Dana Leidig.
But other companies have not followed suit, in part blaming a surge of lawsuits filed before the law
took effect.
The Joint Underwriting Association, a state-run pool that serves as a safety net for doctors who
can't find affordable insurance elsewhere, asked state regulators for a 35 percent rate increase
after the amendment passed.
The cap on damages would not affect its rates, the association said in its filing, because most of
its policies are for less than the cap. The state Insurance Department turned down the request, and
the association, which insures about 2,500 doctors, is trying to determine what it will do next,
said General Manager Joe Chilton.
Whether there will be a rate increase "remains to be seen. Our actuary thinks (there) should be,"
Chilton said.
GE Medical Protective Services, which insures about 6,700 doctors, has asked regulators for a 19
percent rate increase, saying that the cap on damages will actually save it very little money. That
application remains pending.
Two other major carriers, the Doctors Co. and American Physician Insurance Exchange, have not
lowered rates or requested increases.
"We're eager to show that we're responding to the (new laws), but we have a fiduciary responsibility
to the company to make sure our rates are well thought out," Insurance Exchange President Maury
Magids said.
If the new caps seem to be working, Magids said, his company may start lowering rates this summer.
Although official statistics are not available, the law's supporters say malpractice claims
increased by as much as 300 percent in the months before Proposition 12 passed as lawyers worked to
get cases into court under the old rules.
"It's going to take a while for the dust to settle and for us to see the world through this new
reality," said Jim Hurley, spokesman for the Insurance Department.
In the meantime, Hurley said, new companies have contacted the department to inquire about selling
malpractice insurance in Texas, raising the possibility of more players and greater competition
later this year.
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