Day on Torts

My last two posts (here and here) have discussed financial and related information about Tennessee’s largest insurer of physicians that I hope is of interest to Tennessee medical malpractice lawyers and patients.  Now I am taking out my crystal ball and looking in the future of SVMIC’s defense of medical malpractice cases.

Before I get there, let’s think about Business 101.  Businesses exist to produce profit.  Profit is the difference between revenue and expense.  If revenues exceed expenses, there is profit.  If expenses exceed revenues there is a loss.  Losses are bad, profits are good. (OK, I told you it was Business 101.)

There are basically two ways that any going concern can increase profit.  First, it can increase revenue. Second, it can decrease expenses.  

Last week I wrote a post titled " State Volunteer Mutual Insurance Company -2012 Financial and Claims Data" that resulted in an unusual number of emails and phone calls.  To those that took the time to reach out and thank me for the information, thank you – I appreciate your efforts.

One caller brought up an excellent point that needs to be shared.  I mentioned that I thought SVMIC was seeing an increase in the number of insureds because of increased competition and expanding group practices (if a physician joins an existing group that does not do business with SVMIC the insurer loses an insured).  The caller pointed out that another reason for the decline in the number of SVMIC insureds is the fact that more and more doctors are being employed by hospitals.  These doctors then fall within the insurance package carried by the hospital, and have no individual need to buy coverage (except perhaps for tail coverage for their prior work history).  This phenomena  impacts other professional liability insurers as well, but certainly impacts SVMIC given its dominating percentage of the professional liability market for Tennessee physicians.

The other point that people mentioned was the issue of the increasing amount of money spent on defense costs in Tennessee medical malpractice cases.  I noted that the company indicated defense costs had increased over fifty percent in the last five years.  Remember, this has occurred even though the number of lawsuits filed against the company’s insureds has decreased significantly over the last five years.  I cannot share that percentage decline in the number of lawsuits filed against SVMIC insureds in the last five years – I don’t think that information is publicly available.  But, in the fiscal year ending June 30, 2012, there were 374 medical malpractice (now called health care liability) cases filed in Tennessee’s circuit courts.  Five years earlier, in the fiscal year ending June 30, 2008, there were 537 medical malpractice cases filed in our circuit courts. That is a decrease of 153 cases, a 30 percent decline.

State Volunteer Mutual Insurance Company (SVMIC), Tennessee’s bedpan mutual, has been around almost forty years.  Started by doctors for doctors, it writes more medical malpractice insurance coverage for doctors and their extenders than any other professional liability insurer in Tennessee.

The company is insuring a decreasing number of doctors in Tennessee, in part (my guess) because of aggressive marketing and rating-setting by other insurers and an increasing number of doctors joining groups.  The number of SVMiC-insured doctors in 2012 was 14,268, down from 15,501 five years ago.

The company now has $1.169 billion in assets, having broken the billion dollar barrier in 2009.  The company has reserved $560 million to pay claims and claim expenses.  What does this mean?  It means that if the company was able to settle or resolve every case for the reserved amount, and pay predicted expenses for defense counsel and such, the company would have $464 million to return to its policyholders.   In fact, the surplus is probably much greater than that.  History has demonstrated that the company tends to over-estimate its future loss payments and claim expenses, a conservative approach and one which I do not suggest is inappropriate in any way.

The title of this post is the title of a law review article that appears  in Vol. 5, Issue 1 of the Yale Journal of Health Policy, Law and Ethics:    www.dayontorts.com/uploads/file/Debunking Medical Malpractice Myths(1).pdf.

Here is the last paragraph of the article:

No one denies that there is a broad array of very serious health care
issues facing the United States right now-patient safety, rising costs,
availability and affordability of health insurance, and, in some places,
rapidly rising malpractice premiums (although they are easing as we enter
a soft market). But even with these problems, caps are not a solution.
Lawmakers and regulators should stop the insurance industry from pricegouging
their policyholders, even while the industry’s profits rocket
upwards. Moreover, doctors would better serve themselves and their
patients by directing their anger and efforts regarding rising premiums
toward the questionable practices of the insurance industry and the subset
of doctors who repeatedly commit malpractice without facing adequate
discipline. Seeking to take away patients’ rights is not the answer.