An Illinois Supreme Court decision that declared a state cap on damages from medical liability claims unconstitutional will lead to an 18% increase in physician liability claims costs, according to a study from Milliman Inc.
The severity of indemnity claims is projected to increase by about 23% and the average cost to insurers of defending claims will increase about 10%, relative to what the costs would have been under the cap system, the study found. However, Milliman also said rates for medical professional liability insurance may not increase, as insurers knew it was likely that the cap would be struck.
"In Illinois, claim severities have been among the highest in the country. In addition, experience in other states suggest that the overturn of a cap like this can result in significant increases in the number of reported claims going forward," Chad C. Karls, principal and consulting actuary for Milliman, said in a statement.
The court found that portions of a 2005 statute that capped noneconomic damages at $500,000 against doctors and $1 million against hospitals violated the separation of powers between the Illinois General Assembly and the judiciary. The case, Lebron vs. Gottleib Memorial Hospital et al, was filed by Frances Lebron, the mother of baby Abigaile Lebron, who was born at Gottlieb with "numerous permanent injuries" allegedly sustained during a Caesarean procedure, the court noted. Lebron filed suit against the hospital and her medical team in 2006, and in 2007 the Cook County Circuit Court found the caps unconstitutional (BestWire, Nov. 13, 2007).
The Milliman study buttresses insurers' argument that the cap is good for Illinois, said Jeffrey Junkas, a spokesman for the American Insurance Association. Moreover, the legislature is unlikely to act to rectify the ruling anytime soon, he said.
"There's no appetite to address this issue again," Junkas said. "We may have to get back to that crisis condition we had in '03 and '04."
Without a cap from 1997 to 2005, Chicago physicians saw liability premiums jump an average of 10% to 12% a year. When the cap was reinstated in 2005, premiums for Chicago physicians stabilized and even began to shrink, according to the American Medical Association (BestWire, Feb. 4, 2010).
The top Illinois writers of medical professional liability coverage in 2008, according to BestLink, were: ISMIE Mutual Group, with 55.3% market share; APCapital Group, 5.2%; Berkshire Hathaway Insurance Group, 4.5%; American International Group, 3.8%; and ProAssurance Group, 3.2%. BestLink provides online access to A.M. Best's Global Insurance & Banking Database.
(By Sean P. Carr, Washington Correspondent: sean.carr@ambest.com)
