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November 13, 2018

Malpractice premiums haven't risen in a decade. Here's why.

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    Major shifts in the health care industry have kept medical malpractice premiums steady for ten years—even as malpractice insurers' premium revenue has decreased, according to new reports from Fitch Ratings and Medical Liability Monitor.

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    Premium rates stay flat, reports show

    According to Medical Liability Monitor editor Mike Matray, "Medical liability insurance is often the single most expensive cost of doing business for physicians."

    In the early 2000s, doctors' medical malpractice premiums would increase by at least 25% annually. Today, the average annual medical malpractice premium in the United States ranges from $50,000 to $200,000.

    However, those premiums have remained flat over the past decade. According to Medical Liability Monitor, "The percentage of [medical liability insurers (MLIs)] reporting no year-over-year change in rates has been steadily increasing since 2008." And that's despite shrinking malpractice insurer premium revenues, according to Fitch Ratings.

    Health care industry shifts responsible for steady rates

    The reports attribute the steady malpractice premiums in part to broader health care industry changes: a more consolidated sector, the shift to outpatient care, and an increased reliance on telehealth tools.

    For instance, industry consolidation in the last decade has pushed more physicians to seek employment with hospitals or larger medical practices that self-insure, which "reduces the demand for primary [medical liability] coverage" through MLIs and allows providers to avoid paying outrages premiums, the Fitch Ratings report said.

    Further, Matray said, "[M]alpractice claims frequency is at an historic low." The Medical Liability Monitor report stated that drugmakers, instead of physicians, are attorneys' "main targets" at the moment, as they work to address the opioid epidemic.

    No signs of premium increases

    The reports also found that there are no signs premiums rates for malpractice insurance will increase any time soon, despite MLIs' decreasing premium revenue.

    "Many other commercial insurance market segments ... are showing upward pricing movement in 2018 in response to weaker profits," the Fitch report stated. However, the report said those trends are not occurring in the health care sector. According to the report, "[C]ompetitive forces in the (medical professional liability) market" make the possibility of a medical malpractice rate increase unlikely.

    In terms of medical malpractice, Matray said, "it really is a great time to be practicing medicine (Jaspen, Forbes, 10/10).

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