Burnt Orange Report

Insurance Companies Get the Goldmine...

By Jim Dallas

The Houston Chronicle reports that med-mal insurance rates are.... going up. Despite promises made by backers of Proposition 12.

Of the five largest insurers, two are raising rates (considerably) and one is lowering rates (by a pittance amount) next year.

Two months after Texans narrowly approved a measure that supporters said would lower malpractice insurance rates, the cost of premiums will either rise or remain the same for many of the state's physicians next year.

Two of five major carriers in Texas are planning to increase rates for physicians, according to regulators, and only one has promised to roll back premiums.

In September, voters amended the Texas Constitution to cap noneconomic damages in medical liability cases in an effort to curb the soaring costs of malpractice insurance.

Proposition 12 pitted trial lawyers and consumer groups against insurers and doctors, who claimed that runaway jury awards and frivolous lawsuits were to blame for skyrocketing premiums that forced physicians out of business and threatened access to care.

Before the vote, the Texas Department of Insurance estimated physicians could save between 8.5 percent and 11.5 percent on premiums if the amendment was passed.

Thus far, however, only the state's largest underwriter, Texas Medical Liability Trust, has agreed to lower rates next year.

The physician-owned insurer, which covers one-third of the state's doctors, will lower premiums 12 percent on Jan. 1 after increasing rates 128 percent between 1999 and 2003.

Meanwhile, GE Medical Protective and the Joint Underwriting Association have told the state they will increase rates by 19 percent and 35 percent, respectively.

"We realized there could be some initial uncertainty in the market," Texas Insurance Commissioner Jose Montemayor said Tuesday. "TDI will closely examine all of the rate filings by all insurers over which we have regulatory authority to see if they can be justified."

Montemayor and a spokeswoman for Gov. Rick Perry -- who campaigned for passage of the amendment -- said the rates insurers are currently requesting factor in a flood of new litigation filed by plaintiff's attorneys prior to and after the September vote.

Other considerations include the future cost of claims.

But some consumer groups, who have attributed rising premiums to poor investment and underwriting decisions made by carriers, weren't buying those arguments Tuesday.

"By continuing to raise doctors' insurance rates, the insurance industry has shown its true colors," said Dan Lambe, executive director of Texas Watch, which opposed Proposition 12. "They continue to break promises to the Texas Legislature, to Texas doctors, and worst of all, to Texas families."

In fairness, Prop 12 sponsor Rep. Joe Nixon (R - Houston) said that rate reductions wouldn't come "overnight."

Which means the real proof will come next year. But if this is any indicator of the "gratitude" insurance companies have for Texans giving them legal protection, I'd be a little worried what kind of rate-setting attiude the industry will have once the Prop 12 afterglow wears off.