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Prepared Witness Testimony The House Committee on Energy and Commerce
The Medical Liability Insurance Crisis: A Review of the Situation in Pennsylvania
Subcommittee on Oversight and Investigations
Mr. Scott Diener
Chairman Greenwood, Ranking Member Deutsch,
members and staff of the committee, thank you for this opportunity to present
our views on the need for Federal medical liability reform. My name is Scott Diener and I am President
and COO of PMSLIC, a physician owned and physician managed medical professional
liability insurance company. PMSLIC was formed by the Pennsylvania
Medical Society and began to issue policies in 1978 when the Argonaut insurance
company ceased writing. We have been providing medical professional
liability insurance to Pennsylvania physicians for 26 years.We insure approximately 7,000 physicians in Pennsylvania. We are no longer a subsidiary of the Medical
Society. We operate independently as a member of the NORCAL Group of insurance
companies. Our only business mission is to be a long
term and stable provider of medical liability insurance in Pennsylvania. PMSLIC has stayed true to that mission by
using cost based strategies that have routinely resulted in PMSLIC's rates
being the highest in the Pennsylvania market. Even with this cost based strategy, the
unpredictable nature of both the number of lawsuits filed against physicians
(frequency) and the amount needed to pay injured plaintiffs (severity) make it
very difficult to determine an adequate premium. Please allow me to briefly provide some
statistical background:
Conceptually, the job of rate setting is
relatively simple. We first analyze historical data to
establish a trend line.We use that
trend line to estimate the ultimate cost of the claims and suits that will be
made against our insured physicians during the next year. Next we estimate the amount of investment
income that we will earn between the time we collect the premium and the time we
pay the claims. This we use to subsidize the rate we would otherwise have to
charge. We then add in taxes and other expenses, divide by the number of
insureds and send out the bills. The actual rate making process is naturally
more complicated. On average, our claims are generally
resolved a little over three years after they're filed, about six years after
the incident.During that time the
costs of medical care go up, new theories of liability are developed, investment
yields fluctuate and juries' willingness to award money changes. Even using the best experts as PMSLIC does,
these factors make rate setting very difficult - more of an art than a science. In our view, a solution to the medical
availability crisis must include four elements: real medical liability reform,
improvements in patient safety, increased reimbursements to physicians and
improved insurance regulation. PMSLIC supports real, proven,
time-tested reforms such as MICRA (the Medical Injury Compensation Reform Act)
in California. I have been in the medical liability
insurance business for over twenty years.I
have worked in Arizona and California, coming to Pennsylvania just over a year
ago.I can tell you that MICRA
works to produce a more stable and predictable insurance market and is fair to
the medically injured and improves access to health care. Injured parties in California are fully
compensated for their medical bills, lost wages and all "economic damages." This is as it should be. However, here in Pennsylvania and other
states without caps on non-economic damages, there is always the potential in a
case that the jury will be persuaded to award millions of dollars in
non-economic damages. This introduces tremendous uncertainty into
the process.By capping non-economic
damages at $250,000 a large part of the "lottery" system we have in
Pennsylvania is removed. PMSLIC also supports the limits on plaintiff
attorney contingency fees in MICRA.This
makes more money available to the injured plaintiff. PMSLIC supports efforts to improve
patient safety. PMSLIC has a long history of offering our
insureds risk management programs with the goal of improving patient safety.In 1999, for example, in response to an increase in the
number of lawsuits alleging diagnostic errors, we produced a risk management
course entitled The Diagnostic Dilemma, which approximately 4,000
physicians completed. Those physicians who completed it
successfully earned a 5% premium reduction. The
Pennsylvania Legislature took aggressive steps last year to address patient
safety in the MCARE legislation.We
look forward to the results of those efforts. PMSLIC
supports increases in physician reimbursements. Physicians need to be able to make a
reasonable income so that they can pay their costs of doing business and
continue to provide excellent health care to our citizens. Currently they are being squeezed between
increasing costs and reduced revenue.This
needs to be addressed. PMSLIC supports insurance reforms that
ensure companies are charging adequate rates for medical liability insurance. PIC, PIE and PHICO are insolvent. In Pennsylvania, as in many states, there is
a guaranty fund that pays the claimants of these insolvent carriers.The money for these payments comes from assessments on the companies
still writing coverage. From 1997 through 2002 PMSLIC paid $5
million in guaranty fund assessments. Thus, those physicians insured by properly
run carriers, who many times have paid higher premiums all along, are now also
paying for the claims of the insolvent carriers! PMSLIC is committed to insuring physicians
in the Commonwealth of Pennsylvania at adequate rates that are based on our loss
experience. PMSLIC has been working for meaningful
medical liability reform for over twenty years. We believe that if we are to restore
stability and predictability to our medical liability market, ALL interested
parties must be willing to seek and accept a comprehensive solution. In conclusion, we encourage you to
enact federal medical liability reform to improve access to health care by
bringing stability and predictability to the medical liability market, like that
in California, to the rest of the United States. Mr. Chairman, thank you, again, for the opportunity to present our views this afternoon.I would be happy to answer your questions.
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