Cyrus Dugger

Competition gives Illinois doctors malpractice insurance options

Finding solutions....

December 10, 2006 SPRINGFIELD, Ill. - In Illinois' intense debate over the cost of medical malpractice, insurance companies and trial lawyers are often bitter enemies. Kim Presbrey is determined to change that.

A former president of the Illinois Trial Lawyers Association, Presbrey has started an insurance company promising doctors more choice and better deals on expensive malpractice coverage.

He's pumping a lot of money and hard work into challenging the state's major medical insurance company, a doctor-owned business that has more than 65 percent of the malpractice market.

Presbrey predicts his new Doctors Direct Inc. will make money for him and cut costs for doctors feeling the pinch of rising insurance costs.

"We expect to make money," Presbrey said. "To the extent that we are able to decrease their premiums at some level, I think we'll save everybody money."

It may even pay off for the Illinois patients who need care that's growing more expensive and inaccessible.

That was the goal last year when state officials approved changes in the law meant to encourage more competition for malpractice insurance.

Some doctors were fleeing the state or retiring because of steeply rising insurance premiums -- some of which had more than tripled, topping $100,000 a year in some cases. Doctors and insurers blamed the rate increases on out-of-control lawsuit awards, while trial lawyers and victim advocates condemned insurance mismanagement.

In response, legislators approved some limits on lawsuit awards but also strengthened state oversight of doctors and insurers. The major insurer, ISMIE Mutual Insurance Co., was forced to promote competition by opening its ratemaking formulas to other companies.

State regulators says the result is just what they hoped for.

"The marketplace is increasingly competitive, and that competition is going to benefit the physicians and surgeons," said Michael McRaith, director of the state Division of Insurance. "It's going to benefit all of us who pay for health care." (keep reading)

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Kudos to Presbrey for putting his money where his mouth is. And NB that this puts the lie to Lane's claim that lawyers can't open insurance companies if they really believe their own propaganda that the problem is one of gouging.

Posted by: Ted | December 11, 2006 7:13 PM

Ted: Congratulations. Someone will test your proposal to the lawyers. Yours was a good idea. I hope it works and spreads.

One early test will be whether the new company will permit claims made policies or only occurence policies. If they only accept occurence policies, its test will come in 5 to 10 years as it accumulates claims.

The second test is whether they will settle cases without the doctor's consent. So a nuisance settlement of $10,000 is cheaper than $100,000 trial. But, the doctor has admitted guilt falsely, and is in the National Practitioner Database for all future employers to review. I doubt a doctor owned carrier will ever have involuntary settlement as a policy.

I would like to see a more assertive defense approach, where legal and legislative attacks are made on the plaintiff lawyer personally, to deter bogus claims. Current carriers absolutely reject this approach, since they depend on a carefree, unintimidated plaintiff bar for their fees.

Overall, medmal is dead. So, this is not as a bold a move as it appears. On the doctor end, the personal repurcussions for plaintiff expert testimony are now drastic. Jurors are rejecting 70% of cases. The median payout has dropped. The lawyer winning the $100 million verdict is just for show, with his collecting the limit of insurance.

Doctors are talking about boycotting the lawyer and the family of the lawyer, letting them suffer and die untreated. Fortunately, that unethical proposal is a minority view, so far. If medmal resurges, it may not remain a minority view. I hear fear in top lawyers' voices when addressing this area of the law.

If a boycott of the lawyer were to become necessary, it should by groups less privileged and protected than the doctors, all plumbers, all manufacturers, all stores, all utilities, all other service providers.

Posted by: Supremacy Claus | December 11, 2006 11:53 PM

Ted, I laughed out loud (literally) when I saw this post. Your argument was the first to come mind, and I wondered what you'd have to say about it.

I'm with you - Kudos to Pesbrey for his efforts. (Although I still think your suggestion that *I* personally open an unsurer was a bit weak.)

If Presbey does in fact make a profit by charging lower prices, will you admit your argument was wrong and that insurers were gouging?

(Oh, and Kudos to you for the "NB" comment. Not enough people pepper their arguments with Latin anymore. Some say it's arrogant, but I say it's classy.)

Posted by: Justinian Lane | December 12, 2006 1:27 PM

Insurance -- and especially med-mal insurance -- is a long-term proposition with heavy variance. It's easy to show a "profit" in one year, and be insolvent the next. If Doctors Direct is viable and profitable in ten years and still undercharging its competition, then Presbey will have successfully corrected an inefficiency in the market. My guess is that at least one of those things won't be true in ten years unless there's further reform in Illinois, but if I'm wrong, I'm wrong.

NB that Presbey isn't claiming gouging: he's arguing that surgeons are cross-subsidizing the ISMIE rates for primary care doctors. I'm skeptical that that's correct, but I'm fascinated to see him try to cherry-pick surgeons. It's a beautiful empirical test, and, like I said on POL, someone is going to be eating crow in ten years.

Posted by: Ted | December 12, 2006 2:26 PM

"It's a beautiful empirical test, and, like I said on POL, someone is going to be eating crow in ten years."

Well Ted, I sincerely wish that you and I are still here in ten years to see who's right.

Posted by: Justinian Lane | December 12, 2006 8:08 PM