Monday, February 20, 2006

Perry Mason vs Dr Kildare

We don't only talk about health insurance and life insurance here at InsureBlog. Although Medical Malpractice insurance falls in the P&C (Property and Casualty) camp, it impacts the costs of both health care and health insurance.
So it's fair game.
Last year, for example, over 400 legislative bills were introduced to deal with the crisis in one way or another, and 31 states actually passed bills relevant to MedMal.
The American Medical Association considers this very much a "hot button" issue, and has been backing a number of initiatives to reign in what it perceives as a major problem.
According to a Stanford University study, "(s)tates that adopted malpractice law reforms such as caps on non-economic damages experienced an increase in physician supply."
It's also likely that such reform would help to lower health care costs (and, potentially, insurance premiums).
Texas provides an example of this: as recently as two years ago, so many lawsuits were being filed against doctors there that many simply closed up shop, or began to limit their practices, just to reduce the risk of being sued.
Texas passed a law capping non-economic damages at $250,000 (but put no limit on economic damages), and saw significant changes. Lone Star State hospitals saw their MedMal costs frop 17%, and doc's saw a 12% decrease. Not too shabby.
When the cost of health care declines, the cost of insuring it may also go down.
You'll notice, of course, the qualifiers. I'm not convinced that there is necessarily a one-to-one relationship between the cost of health care and the cost of health insurance. There are other factors that go into the insurance ratings process beyond the raw cost of care.
But there will certainly be a downward pressure exerted on premiums as a result of these kinds of savings. Whether that will translate into real dollars saved remains to be seen. If nothing else, it gives carriers an incentive to discount rates in those states which have enacted such reforms.
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