As Insurance Profits Rise, Will Physician Premiums Fall?

We are constantly inundated with the news that medical malpractice reform, and particularly caps on damages, are necessary to keep medical malpractice insurance premiums low. The argument is that high premiums are chasing doctors out of practice areas and certain geographic regions.

While it is worth noting that some very astute commentators have recognized that what we need is to control malpractice, not cap damages allowable to injured victims, I’m curious whether one of the nation’s leading malpractice insurers will lower the premiums it charges doctors in light of its recent profit windfall:

Medical malpractice insurer ProAssurance Corp. reported a a 49 percent increase in year-over-year fourth quarter net income after trimming expenses by 74 percent.

ProAssurance posted 2008 fourth quarter net income of $76.3 million, up from $51.3 million in 2007. The Birmingham-based firm’s total expenses dropped to $24.4 million from $94.9 million during that time.

In calendar year 2008, ProAssurance reported net income of $177.7 million, a 6 percent increase over 2007. The company’s gross written premiums fell to $471.5 million in 2008 down from $549 million the year before. However, its total expenses dropped to $318.8 million from $469.7 million in that span.

I have to admit, I’m curious how a can company "trim" 74% of its expenses. One less corporate jet, perhaps? If I were a physician who had been paying some of those high premiums to ProAssurance–an insurer with a reputation for refusing to settle malpractice lawsuits no matter how heinous the negligence and injury–I would be wondering exactly what corporate largess had been spent in 2007.

The point is that if physicians are paying high premiums, medical malpractice damages caps are not the way to lower such premiums. Lessening the incidents of malpractice and enacting meaningful insurance reform would go much further in assisting doctors while protecting patients.