New York Freezes Malpractice Rates While Hoping for Reforms

New York Governor David A. Paterson has signed legislation freezing medical malpractice rates for physicians in New York for one year in an effort to buy time to come up with reforms to provide premium relief for doctors.

Paterson said the legislation gives the state additional time to develop a long-term solution to the state’s medical malpractice problem.

Agreement on the rate freeze was reached by the Legislature on August 19.

The insurance rate bill, which was part of the state budget package, will freeze medical malpractice premium rates for physicians and suspend an anticipated surcharge until June 30, 2009. Without this legislation, many physicians would have seen as much as a 30 percent increase in rates, according to state officials.

“I want to thank the Legislature for stabilizing malpractice rates for the short term, thereby ensuring that our doctors can continue to provide quality care in New York without getting suffocated by more back-breaking fiscal burdens,” said Paterson. “However, our work is now cut out for us, and we remain committed to creating comprehensive and meaningful medical malpractice reform.”

Paterson said he is hopeful that reforms to achieve medical malpractice cost savings can be finalized during the next legislative session.

Superintendent of Insurance Eric Dinallo, who also chairs a Medical Malpractice Liability Taskforce, said his department did not levy surcharges or raise rates as would have been required by law and by the insurance companies’ financial condition in hopes that reforms will be enacted.

“While comprehensive reform has not yet been achieved, much groundwork is being laid,” Dinallo said.

On June 30, Dinallo delayed the setting of new medical malpractice insurance rates past July 1, 2008 to allow time for the negotiation of reforms. He said that when rates for 2008-2009 are determined, they will be retroactive to July 1, 2008.

In July, 2007, Dinallo approved a 14 percent rate hike in malpractice insurance. While lower than what insurers had requested, Dinallo said the increase was necessary to avoid further financial deterioration of the insurers and perhaps an “irreversible crisis in an already severely distressed market.”

Dinallo said the 2007 rate increase came after years of the state setting rates below what was needed. It also followed the state’s appropriation of $691 million of medical malpractice insurance reserve funds, which could have served to enhance insurer solvency and temper rate spikes, and the state’s failure to address the underlying causes of malpractice costs.

Legislative Delay

Legislative leaders agree it makes sense to wait for reforms before setting new rates.

Republican Senate Majority Leader Dean G. Skelos said the rate freeze is a temporary measure that will give the state “more time to work out new reforms and solutions to this complex problem that is in the best interests of everyone that would be impacted.”

Assembly Speaker Sheldon Silver, a Democrat, said New York’s medical malpractice insurance rates are among the highest rates in the nation. “This legislation allows us to continue and indeed broaden our discussions towards enhancing patient safety while stabilizing the medical malpractice insurance market, both of which have long been priorities of the Assembly,” Silver said.

For the insurance industry, the delay is just more of the same and reforms are late. They want the state to take steps to reduce the severity of claims, which has increased despite flat or even downward trends in frequency.

The inability of the year-old task force to reach a consensus coupled with the growing liabilities of the Medical Malpractice Insurance Pool are impeding progress, said Donald Fager, vice president of the state’s largest medical malpractice insurer, the Medical Liability Mutual Insurance Co.

“What this means is that nothing has been done to improve the situation,” he said. “They haven’t dealt with the problem.”

There’s more than one problem to fix, according to the New York Public Interest Research Group. “We think there are a lot of problems,” said NYPIRG’s Russ Haven. “This basically freezes the status quo going forward and is buying the governor and the various stake holders some time to address the issue.”

Meanwhile, doctors maintain that any rate increase would hurt patients. “The imposition of a premium increase at this time could have destabilized our health care delivery system to the serious detriment of our patients and of all New Yorkers,” said Michael Rosenberg, M.D., president of the Medical Society of New York.

Some physicians claim that high insurance rates are driving them out of the state and affecting the availability of care. In March, the medical society staged a rally in Albany at which they arranged empty chairs and left their white coats on the steps of the capitol to symbolize physicians who have already left New York or retired.

But NYPRIG says there are plenty of physicians. Haven said the complex problem involves bad doctors and how insurance companies rate physicians.

Earlier this year, NYPIRG and other patient groups criticized one proposal before the medical malpractice task force to create a malpractice indemnity pool that would cover medical expenses for injured patients.

“We don’t want the state subsidizing unsafe doctors,” John Guyette, a spokesman for CURE-NY, an umbrella group for patient safety organizations, said in March when the idea surfaced. No such plan was made public, however.

The groups also complained they were being left out of the task force deliberations.