By Alicia Gallegos

Angela Intili, MD, an ob/gyn, was used to seeing her medical malpractice insurance premium rise slightly every couple of years. But she was shocked by the drastic rise she recently experienced.

In the last two years, Intili's premiums shot from $60,000 to $130,000, she said.

"After 30 years of practice, this is the first time I've asked myself if I can even afford to continue practicing obstetrics-gynecology," said Intili, 62, from Joliet, Illinois. "It's gotten very difficult to make ends meet as far as overhead because of the liability costs. I still love what I'm doing but I don't know if I can afford to do it anymore."

Even more frustrating for Intili was learning that claims in Illinois have sharply declined. From 2016 to 2020, tort filings in Illinois decreased by 43%, according to a state report.

"If claims are going down, I don't understand why premium payments are going up," she said.

Physicians across the country are experiencing a similar paradox. Claims are down, yet premiums are rising.

A 2021 found that 42% of primary care physicians were sued in 2020 through mid-2021, down from 52% in 2019. Fifty-six percent of specialists were sued in 2020 through mid-2021 compared with 62% in 2019, the report found. The pandemic was undoubtedly behind the decrease in suits, according to legal experts.

Yet, physicians paid higher premiums in 2021 and are on track for increases again in 2022, according to data and analysts.

According to Conning, direct premiums written for physicians increased 7.0% in 2021 (from $5.01 billion to $5.36 billion). Conning, an investment management firm that serves the insurance industry, analyzes annual financial reports filed by insurers to state insurance departments. The Medical Liability Monitor's 2021 report found that premiums for internists, surgeons, and ob/gyns in states without Patient Compensation Funds rose by an average of 2% in 2021.

The disparities raise questions about why physicians are paying higher premiums when having fewer claims is likely saving insurers' money. Shouldn't physicians' rates reflect the reduction in claims?

Cases Plummet During Pandemic

During the pandemic, the volume of new medical malpractice claims dwindled to nearly nothing, says Michael Matray, editor of the Medical Liability Monitor, a national publication that analyzes medical liability insurance premiums.

"The court system closed for a while," he said. "No elective procedures were being done in 2020 and the early parts of 2021. If you have no treatment, you have no malpractice, so of course, claims frequency tumbled down to a trickle."

The number of large awards also decreased during the pandemic, noted Bill Burns, a director of insurance research at Conning.

"For claims that were already in the system, many of them could not be resolved because of the court closures, inability to take statements and depositions, etc.," he said. "This resulted in a drop in verdicts."

In 2021, there were 16 medical malpractice verdicts of $10 million or more in the United States, according to TransRe, an international reinsurance company that tracks large verdicts. In 2020, there were six verdicts of $10 million or more, TransRe research found. This is down from 52 verdicts of $10 million or more in 2019 and 46 verdicts of $10 million or more in 2018.

But although the pandemic lowered claims and decreased the number of payouts, one important aspect was untouched by the COVID-era, says Richard E. Anderson, MD, chairman and CEO for The Doctors Company, a national medical liability insurer, and TDC Group.

"It's a fair question: If claims are down, why are premiums continuing to go up?" Anderson said. "The answer is severity."

High-Dollar Verdicts Pave Expensive Path

The upward trend in severity has continued for about 6 years and has not slowed, Anderson said. Severity refers to high-dollar verdicts and settlements.

"We're seeing record-high verdicts all over the country," he said. "We used to have maps that showed the top 10 medical malpractice verdicts or awards, and they would be clustered where you'd expect them to be, New York, Florida, Illinois, and so forth. Now, if you look at those top 10 verdicts, they could be anywhere in the country."

In Minnesota for instance, a jury awarded a record $111 million in damages to a college student in May after finding a hospital and an orthopedic surgeon negligent in treating his broken leg. In April, a Kansas City jury awarded a family $25 million after finding that an ob/gyn and hospital failed to properly treat a mother in labor, causing brain damage to her infant.

Such record payouts factor into premium costs, said Ned Rand Jr, CEO for ProAssurance, a national medical liability insurer. Though only a minority of claims reach that level, when a high award occurs, it puts pressure on the ultimate cost to resolve claims, he said. The frequency of claims filed is also expected to soon rebound, he noted.

"As we price the product sitting here today, we have to factor both of those in," Rand said. "That's why we, as an industry, continue to see, by and large, rates going up. And we fell behind. Some of this severity, in particular, as an industry, we weren't pricing fully for, so we've been playing catch-up."

High-dollar awards — also called nuclear verdicts — set the arena for future settlements in similar cases, Anderson adds.

"If it was an orthopedic case for instance, and there was a similar injury in another case, that's the trial lawyers' starting point for the award," he said. "Now, they're not going to get it, but it distorts the negotiations. As we have more and more nuclear verdicts, it becomes harder to settle claims for reasonable amounts."

What Does 2022 Have in Store?

Analysts say the backlog of malpractice claims in the court system could prove calamitous for premiums and the liability landscape.

Courts are slogging through the pileup caused by the pandemic, but it's estimated that there is still about a one-thirds larger case backlog than normal, according to Matray.

Such delayed claims may end up costing more because of social inflation, said Burns.

"People look at the world differently than they did 2 years ago," he said. "A jury may have awarded $5 million for a claim a few years ago. But then the pandemic hits, and we have the George Floyd incident, and we have people out of work and a shortage in baby formula. Yet, companies are still making a lot of money and many insurance companies are turning record profits. Today, that jury may look at a sympathetic malpractice victim and award $10 million for the same claim."

Concerns also exist about a potential surge of new malpractice claims. Rand compares the possible wave to a large bubble.

"I liken it to a cartoon, when one character grabs the hose and a big bubble forms as the water builds up," he said. "Then the character releases, and water comes flooding out. As an industry, we wait, wondering: Is there going to be this flood of claims as the court systems reopen and the statute of limitations approach around some of these claims? That's an ongoing concern."

As for impending premiums, physicians can expect rises in 2022 and again in 2023, according to Chris Wojciechowski, a partner at TigerRisk Partners, a reinsurance broker.

"In general, there is a lot of uncertainty around the state of the economy, the tort environment, litigation post-COVID, and overall volatility across the capital markets," he said. "Furthermore, thanks to social and financial inflation, the potential for very severe verdicts has increased dramatically, and as courthouses reopen, the trends are not looking favorable. While many of the physician carriers have strong balance sheets, they can't lose money on an underwriting basis forever."

For Intili, the Illinois ob/gyn, news of another impending increase in 2022 is distressing. She expects another 10%-20% rise in 2022, she said. If she were younger and earlier in her career, she might've considered moving, she said, but her family lives in Illinois and she cares for her older parents.

"I'm not ready to retire," Intili said. "I'm looking into options, possibly becoming a hospitalist or doing locum tenens work. I've been a solo practitioner for 27 years and I love the autonomy. But these high premiums are making it almost impossible to continue."