Medical Malpractice Insurance Profits Soar - So Much For Tort Reform Crisis
About seven years ago, there was something that various P.R. companies and media outlets referred to as “the Medical Malpractice Crisis.” The premise was this: Due to constant onslaught of costly and pointless medical malpractice cases filed by greedy lawyers on behalf of people who weren’t really injured, medical malpractice insurance companies were all on the brink of insolvency. Going bankrupt. Completely tapped out. Could barely afford to keep the lights on.
The only way that these companies could possibly stay alive as commercial enterprises was to raise their insurance rates dramatically. They didn’t want to do that, of course, but really, what other choice did they have? So they raised their rates, and some doctors found the rates essentially unaffordable, and since they couldn’t practice medicine without medical malpractice insurance, there were some cases of doctors either leaving the states where they set up their practices or leaving medicine altogether.
The outcry was enormous, and legislatures all over the country tried to pass “damage caps,” which are arbitrary limits on the amount of money that a victim of medical malpractice could receive. And in many cases, these caps were successful. In Texas, for example, there is a cap of $250,000 for non-economic damages in lawsuits against doctors. Florida has a $500,000 cap, unless there is a death or permanent vegetative state, in which case the cap is $1,000,000.
The reasons that were given for the so-called “medical malpractice crisis” were (and still are) completely debatable. For instance, there was never any sudden onslaught of medical malpractice cases. The level of malpractice cases between 1991 and 2005 either dropped or remained relatively constant, while the amount of money paid out to medical malpractice claimants dropped significantly.
If that was the case, then why were so many medical malpractice insurance companies crying poverty and raising their rates? One study claims that it wasn’t a sudden avalanche of medical malpractice lawsuits or enormous verdicts that caused the rates as much as it was the fact that the medical malpractice insurers’ investments took a beating shortly before the medical malpractice “crisis” began. A poorly performing bond market does not make a very good villain from a PR standpoint, but the idea of “greedy trial lawyers” or the fiction of people winning millions of dollars over a stubbed toe works perfectly. And it worked quite well. There is now a limit on the amount of compensation that a medical malpractice victim can receive in many states, even though there is no such limitations on the amount of damage that a careless or incompetent doctor or surgeon can do. So in some states, it truly does not matter how badly a doctor messes up, or how much that mistake alters or even ends the victims’ life. Medical malpractice insurers have had their interests and profits protected.
The market reflects that change in the fortunes of insurance companies. Most medical malpractice insurance companies are seen as a smart investment, particularly if they only do business in states where there are legal limits to the amount of money that they are responsible for paying out. For instance, Warren Buffett’s investment group Berkshire Hathaway purchased malpractice insurer Medical Protective for $825 million. Mr. Buffett has a long history of making smart investments, and it appears that this purchase was a continuation of that trend. And FPIC purchased Advocate MD for $33 million, despite the fact that Advocate MD was only the fourth largest malpractice insurer in Texas. Since the purchase, FPIC’s shares have done nothing but increase in value. Exactly one year ago, FPIC was trading at $22 a share. Today it’s valued at $36.
The bottom line is that malpractice insurance remains extremely profitable, so much so to the point that the average profit for medical malpractice insurance companies is 31.2%, which is a ridiculously high margin for any business.
Despite these consistent profits and despite the legal system being essentially rigged to ensure that they remain vibrant, you would think that from public statements and lobbying efforts, those medical malpractice insurance companies are a beleaguered minority with wolves at the door. In practically every state legislature and in every session of Congress there are several bills where representatives are demanding more and more restrictions on the liability of medical malpractice companies. In every press release malpractice insurers make it seem like they are just barely hanging on as a business, even as their quarterly reports prove otherwise.
Greenberg and Bederman is a personal injury law firm located in Silver Spring, Maryland. We are currently offering legal assistance to people in the Washington, D.C. area who have been injured due to no fault of their own. That includes injury victims in Maryland and Virginia. Our practice areas include car accidents, motorcycle accidents, pedestrian and bicycle accidents, premises liability, defective product injuries, injuries due to pollution and groundwater contamination, and injuries due to surgical errors and other medical malpractice errors, bad diagnoses, delay of treatment and other forms of medical malpractice. If you or a loved one has been injured due to no fault of your own, contact Greenberg and Bederman for a free legal consultation today.
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