State regulations you need to keep in mind

Regulations and policies can vary by state. We've assembled some important information for a number of states including any recent or significant changes. If you would like more detailed information about the market in your state(s), please contact us. We can provide information on medical malpractice rates, claims trends and more. Below is a synopsis for some areas: 

Arkansas has many of the same medical malpractice insurance companies that write business all over the country. They also have a few of their own carriers that stay exclusive to the state. Nevertheless, several of the carriers offer similar features on their policies.

  • Consent to settle provision
  • Defense costs that are outside the limits of liability
  • Unlimited tail length
  • AM Best Rating of A- or better
  • While other limits of liability are available, the most common throughout the state include a per claim limit of $1,000,000 and an aggregate limit of $3,000,000.

Arkansas Tort Reform

In 2003, Acts 1007 and 649 were approved to enable the establishment of tort reform for the state of Arkansas. The acts placed a cap on punitive damages limiting them to the greater of $250,000 or 3-times the amount of compensatory damages. Several statutes of limitations have been established as well. All of which cover claims ranging from death to cases filed by minors against OB/GYN’s.

Although tort reform has reduced claim filings significantly, many of the features have faced much scrutiny since its approval in 2003. A great deal of concern for tort reform stems from the belief that provisions in the acts are unconstitutional. Repealing tort reform would make Arkansas less attractive to medical malpractice insurance companies and physicians.

Before the Medical Injury Compensation Reform Act of 1975 (MICRA), California faced a medical malpractice insurance crisis. The crisis arose when juries began awarding extreme financial compensation causing medical malpractice premiums to skyrocket more than 300%. MICRA placed a $250,000 cap on non-economic damages and did not cap damages for lost wages. In 1999, a California bill sought to increase the $250,000 cap to reflect the cost of living. In order to maintain the current cap in 1975 dollars, the cap would increase to $753,000 by the year 2000. However, the bill was not passed and the current cap on non-economic damages remains at $250,000. Since MICRA was established, California has become one of the most stable medical malpractice markets in the country. MICRA has served as the national model for state and federal liability reform efforts.

Medical Malpractice Insurance Summary for California

Claims-made policies are the most common policy type in California and have a maximum maturation length of 5-6 years. Claims-made coverage provides coverage for claims that arise while the policy is in effect if the insured had coverage at the time of the incident. The typical limits of liability in this state are $1,000,000 per occurrence with a $3,000,000 aggregate limit. Most hospitals require their doctors to carry these same limits of liability.

Many factors are taken into consideration when determining which carrier to choose. Such factors include, AM Best rating, the year the company was founded, coverage trigger, and free tail provisions. There are three types of medical malpractice insurance carriers in the state; they include: Stated Admitted Carriers, Surplus Lines Carriers and Risk Retention Groups. Over the past few years, fewer claims have been filed allowing some carriers to give out dividends and reimbursements to their insured.

Prior to the Health Care Availability Act (HCAA) of 1988, Colorado physicians were experiencing extremely high medical malpractice insurance premiums causing them to relocate. With a shortage of high-risk specialty doctors, citizens of Colorado recognized the need for change to rebuild their healthcare system.

In 1988, the HCAA was established to place a cap on damages awarded in malpractice cases. The cap placed on non-economic damages is set at $250,000, with an aggregate payout of no more than $1,000,000. Punitive damages may not exceed the amount of actual damages awarded. However, the courts may increase punitive damages up to three times the amount of actual damages for defendants who show continued behavior of the disputed action in a willful manner. Other procedures have been put in place to ensure disposal of frivolous claims.

Summary of Colorado Medical Malpractice

As of July 1, 2010, physicians practicing are required by state law to carry a minimum indemnity amount of $1,000,000 per incident with a $3,000,000 aggregate limit.

Prior to tort reform in 2003, Florida was branded with being a highly unfavorable state for both doctors and med mal carriers. Among the riskiest counties to practice included Dade County, Broward County Palm Beach County because they generated the most claims. Comparatively, physicians practicing in Florida paid much more for the same coverage than those practicing in the same field but outside the state. For this reason, many doctors decided to go “bare”. In other words, a physician chooses to practice without the security of medical malpractice insurance. In order for a physician to be able to practice without malpractice insurance, they must follow certain conditions.

  • Post bond
  • Establish an escrow account
  • Obtain an irrevocable letter of credit
  • Hang a sign outside their office to inform patients that they don’t carry specific insurance

Florida Med Mal Market Summary

Since the approval of tort reform, Florida has seen substantial growth in many sectors of its medical malpractice insurance market. It has become the fifth largest market based on direct written premium; of which 80% of the total written premium is comprised of 22 carriers - an increase from years past. A previously unavailable policy option, known as a consent-to-settle provision, has been approved and will be effective as of October 2011. A consent-to-settle provision gives the physician an option to settle the claim outside of court, in order to avoid paying more in damages and legal fees. Among other policy options carriers in Florida offer include:

  • Claims-made maturity of 5 years
  • Incident coverage trigger
  • Defense costs outside the limits of liability
  • Unlimited tail length

Although physicians have the option of choosing higher limits, many choose to carry limits of $250,000/$750,000. Hospitals allow doctors more privileges if they choose the lower limits. Other limits of liability offered in Florida include per claim limits of $1,000,000 and an aggregate limit of $3,000,000.

The Kansas medical malpractice insurance market is stable and the presence of multiple carriers provides competitive options for physicians. By law, all healthcare providers in the state of Kansas must hold professional liability insurance. The insurance policy must provide per claim limits of $200,000 and an aggregate limit of $600,000. The Kansas Department of Insurance will only allow physicians to purchase insurance from a state admitted carrier. Admitted carriers are backed by the state guarantee and are regulated by the Department of Insurance.

The state legislature created the Health Care Provider Insurance Availability Plan to provide insurance for those physicians who cannot obtain commercial state admitted insurance coverage because of nontraditional practice or claims. To be covered by the Availability Plan physicians must have two declination letters from two separate carriers.

Healthcare providers are also required to participate in the Health Care Stabilization Fund (HCSF), which provides additional coverage on top of their commercial carrier policy. Healthcare providers are to select one of three options for additional coverage provided by the HCSF and are then charged a surplus on their premium. Those options include a per claim limit with an aggregate limit of:

  • $100,000 per claim with $300,000 annual aggregate
  • $300,000 per claim with $900,000 annual aggregate
  • $800,000 per claim with $2,400,000 annual aggregate

With one exception, there are no additional charges from the Fund for physicians practicing in other states outside of Kansas. However, physicians practicing in both Missouri and Kansas are assigned a 25% surcharge.

During the medical malpractice insurance crisis of the 1970’s, the state of Louisiana introduced a law that separated medical malpractice claims into two different groups: claims against private healthcare providers, and claims against public or state healthcare providers. The Louisiana Medical Malpractice Act (LMMA) was able to place a cap of $500,000 on non-economic damages. However, in 2006, the 3rd Circuit Court of Appeals ruled that the Medical Malpractice Act’s cap was unconstitutional because it did not guarantee adequate remedy to the claimant. When the ruling was appealed to the Louisiana Supreme Court, they remanded the ruling back to the inferior court because the issue was never properly argued.

Propositions for the cap to increase its limits to $750,000 have been written and presented to the Louisiana legislature. Such bills would call for increasing the primary insurance limits and expanding the responsibility of the patient-compensation fund.

Patient Compensation Fund

Louisiana is one of only a few states in the country that has a patient compensation fund. Patient compensation funds are pools of money established by the state and created by doctors’ surcharge payments to provide additional monetary support to pay claims in excess of insurance limits. Although state healthcare providers are automatically covered, private providers may choose to opt out of the fund if less expensive coverage can be found. For medical malpractice insurance companies that provide the first $100,000/$300,000 limits, the PCF supplies an additional $400,000 per claim, plus unlimited future medical expenses up to the $500,000 cap.

In 2005, House Bill 393 was signed and approved to designate tort reform for the state of Missouri. The bill made several changes to the medical malpractice insurance market in the state. It capped punitive damages and revised the cap placed on non-economic damages. The limit on punitive damages is set as the greater of $500,000 or five times the full amount to be paid to the claimant. Non-economic damages have been lowered the inflation-adjusted cap of $570,000 to $350,000.

Missouri’s tort reform also places certain stipulations for defendants to have joint and several liability. Joint and several liability only applies to defendants who are 51% or more at fault. Any defendant found less than 51% at fault is not liable. Defendants found to have joint and several liability are responsible for proportionate damages bases on their liability. In addition, joint and several liability is not taken into account for punitive damages. House Bill 393 has affected the rule regarding the venue. In order to protect the physician from an unfair trial that is typically in the claimant’s favor, the location of the trial must be where the individual resided in when the injury first occurred.

Chapter 383 RsMO

The Missouri medical malpractice insurance market has remained stagnant for the past decade. However, Chapter 383 of the Missouri Revisited Statutes has made a distinct change in the market, allowing new competition to arise. This new competition, known as a mutual insurance company, is a nonprofit that provides malpractice insurance to physicians. Chapter 383 of the Missouri Revised Statutes covers a series of topics including the Healthcare Stabilization Fund Feasibility Board, the annual publication of market rates and reporting medical malpractice claims.

Nevada’s medical professional liability insurance market has never been particularly stable. Due to nonexistent carrier commitment, demonstrated in 2002 when the state’s largest carrier, St. Paul Insurance Company, pulled out and left the market virtually free of carrier competition. Lack of carrier commitment and competition accompanied by outrageous jury verdicts resulting in massive payouts led to unaffordable premiums depleting the quality and availability of healthcare in Nevada. In response, physicians created the Nevada Medical Liability Physicians Task Force to raise attention of the crisis to the public.

In 2002, Nevada’s legislature approved the restructuring of tort legislation throughout the state. The tort reform program placed a $350,000 cap on noneconomic damages. However, exceptions to the tort reform were available to victims of gross negligence and exceptional circumstances. With this tort reform program failing to provide the desired outcome, the “Keep Our Doctors in Nevada” ballot initiative was created and approved by voters. Since the omission of the exceptions from the program, the number of claims has dropped, more doctors are entering the state and premiums have started to stabilize.

Nevada Medical Malpractice Insurance Market Summary

Claims-made policies are the most common policy type in Nevada. Claims-made coverage provides coverage for claims that arise during the duration of the policy as long as the incident occurred while the insured had coverage. The typical limits of liability in the state are $1,000,000 per occurrence with a $3,000,000 aggregate limit. Most hospitals require their doctors to carry these same limits of liability. Many factors are taken into consideration when determining which carrier to choose including: their AM Best rating, the year the company was founded, coverage trigger and free tail provisions.

Since the mid-1970s, Nevada has had trouble maintaining a stable marketplace. One-by-one, medical malpractice insurance carriers have left the state or quickly become insolvent. In the years preceding 2001, several different carriers were active in the Nevada malpractice market. Following 2001, the market began to crumble. The market leader, The St. Paul Company, along with other carriers, withdrew from Nevada. Shortly after, the insurance commissioner at the time, Alice Molasky-Arman, held a hearing, which resulted in the formation of the Medical Liability Association of Nevada (MLAN). Since then, the market has improved and stabilized encouraging market growth.

Medical malpractice insurance in New York is almost as unique as the state itself. New York is one of the fifteen states that have not enacted any kind of tort reform policy capping economic damage payouts. As a result, insurance premiums are very high. In 2010, the New York State Insurance Superintendent approved a 5% rate increase. Five territories have rates that exceed the rates of the rest of the state. These territories, also known as boroughs, are Bronx County, Brooklyn County, New York County, Queens County, and Richmond County.

Physicians Reciprocal Insurance (PRI), Medical Liability Mutual Insurance Company (MLMIC), and Medical Malpractice Insurance Pool, a.k.a. “The Pool”, are the only state admitted carriers providing little to no competition. There are Risk Retention Groups that write competitive premium rates; however, many hospitals will not accept insurance from them. Furthermore, physicians insured by state admitted providers are eligible for an additional $1,000,000 of excess limits.

The standard limits of liability in New York are either $1,300,000 per claim limit with $3,900,000 aggregate limit or $1,000,000 per claim limit with $3,000,000 aggregate limit. Hospitals require physicians to carry at least $1,000,000 per claim limit with $3,000,000 aggregate limit. Also unique to New York is the amount of occurrence policies written. Occurrence policies cover claims based on the date the incident occurred. Occurrence insurance policies can be expensive because they provide coverage for physicians indefinitely. New York is one of the only states that still write occurrence policies in abundance. For the claims-made policies that are written, the maximum maturation of a policy is eight years.

New York Tort Reform

There is much debate over whether or not tort reform should be passed in New York. Efforts to pass tort reform are slowly succeeding. The failed aspects cause the most problems. With only caps for punitive damages, economic and non-economic damages compensation paid to plaintiffs can be astronomical. Payouts have dramatically risen since the 1970s, reaching more than a half-billion dollars in 2001.

Since the approval of tort reform, Oklahoma has seen a significant reduction in the number of claims and the average loss payments per suit. Tort reform placed a cap on jury administered payouts of noneconomic damages. In cases that demonstrate the defendant’s disregard of the rights of others, the jury may award punitive damages not to exceed $100,000 or the amount of the actual damages awarded. In cases where the jury finds the defendant has acted intentionally and with malice, punitive damages may be awarded up to $500,000. However, if the judge finds that the intentional and malicious act threatened human life, the cap does not apply. There is no cap on noneconomic damages from bodily injury that resulted from professional negligence where the plaintiff:

  • Suffered permanent and substantial physical abnormality or disfigurement
  • Lost the use of a limb
  • Loss of, or impairment to, a bodily organ or system
  • Suffered a permanent physical functional injury preventing the plaintiff from being able to independently care for himself and perform life sustaining activities
  • If the defendant is found to have acted in reckless disregard for the rights of others, grossly negligent, fraudulent, or with malice, there is also no cap on awarding of damages.

About Oklahoma Medical Malpractice Insurance

Oklahoma has a state guarantee fund which protects the insured if their carrier is unable to provide contracted coverage. Not every carrier has opted in to participate which provides an extra incentive to purchase a carrier who is backed by the state guarantee fund. In Oklahoma physicians usually carry limits of liability of $1,000,000 per incident and $3,000,000 aggregate limit. Things to consider when choosing an insurance provider include, but are not limited to, the state admittance, coverage trigger, AM best rating, free tail provisions and available premium discounts.

With the instillation of tort reform and the competitive market provided by multiple carriers, Oklahoma has become a state of stable premiums and improved access to healthcare for citizens.

The professional liability insurance marketplace in Texas has been extremely volatile the past 20 years. Due to increasingly high claim payouts, many carriers were either driven out of business, or were acquired by other carriers in the late 1990s. By 2002, Texas had reached an all-time low of only three standard markets available for medical malpractice insurance.

In 2003, Texas voters responded to this crisis with approval of a tort reform bill titled “Proposition 12” which places a $250,000 cap on non-economic damages awarded in malpractice suits. Tort reform influenced a sharp decrease in claims activity and the severity of claims payouts, enabling insurance companies to lower premiums. Several carriers were able to re-enter the market, and new carriers were created in the following years. Texas quickly became a very competitive marketplace. Whereas in 2002 there were only three markets in total, by 2010 there were six standard markets which represented approximately 75% of the written premium and the rest of the market share was represented by over 45 professional liability companies.

As in many other states, the Texas marketplace is currently experiencing consolidation. Several insurance companies such as American Physicians Insurance Group (API), Advocate M.D., and Medicus have been recently acquired or merged with larger insurers, in an effort to increase both market share and efficiency. As the consolidation trend continues, the number of competitors will shrink and insurance options may become more limited. In this shifting marketplace, it is increasingly beneficial to seek advice from a large broker like Gallagher, so that physicians can find the insurance best suited to them at the best price.