Holden embraces changes to stem malpractice costs

JEFFERSON CITY, Mo. -- Democratic Gov. Bob Holden embraced a proposal Thursday to attack doctors' rising malpractice insurance costs by creating a temporary state-run insurance plan.

The state plan would be limited to physicians in some of the higher-risk specialties that have seen the largest rise in premiums, such as obstetricians, neurosurgeons, orthopedic surgeons, and trauma and emergency room doctors.

To cover start-up costs, the state could impose fees on Missouri's 1,600 insurance companies. If physicians' premiums fail to cover any payouts, another assessment could be imposed on insurers.

The proposal would require legislative approval, as would some of the other suggestions in a report by the Missouri Department of Insurance.

Holden touted the report's recommendations as an alternative to a Republican plan to impose more restrictions on lawsuits -- including a lower cap on some financial awards by juries -- as a way to encourage lower malpractice insurance premiums.

The Insurance Department's recommendations include some of the Republican ideas but would not lower the limit on jury awards for such things as pain and suffering, emotional distress or a less enjoyable life.

"As we work toward a solution, I want to make certain that we do not misdiagnose the problem," Holden said in reference to the Republican proposal.

Republican House Speaker Catherine Hanaway said lawmakers will consider insurance industry changes.

But "the very liberal tort laws we have in the state are also a component," said Hanaway of Warson Woods, "and I'm disappointed the insurance commissioner and governor didn't probe into that further."

Insurance Department Director Scott Lakin, a former Democratic legislator, said he did study whether malpractice premiums could be lowered through stricter limits on jury awards.

A 1986 law limited so-called non-economic damages at $350,000 per negligent incident, adjusted annually for inflation. That limit now stands at $557,000.

Lowering the limit to a flat $250,000 -- as is the law in California and is proposed by some Missouri Republicans -- would do little to help the current problem, Lakin said.

Based on the experiences of other states, "any relief for physicians and other health care providers would not take place for several years and would amount to much smaller savings than physicians are demanding," the Insurance Department report said.

More immediate relief could be provided through a state-run insurance program, called a joint underwriting association, Lakin said. State law already allows such an entity, but would require it to charge double the rates available in the private sector for the first year of a physician's malpractice coverage.

Since high insurance rates are the problem, Lakin said lawmakers would have to change that provision, as well as several others to limit the potential costs to an already tight state budget. He said the state-run program likely could be disbanded within three years.

Rep. Richard Byrd of Kirkwood, who is sponsoring the Republican bill, criticized the assessments in a state-run program as "a tax that will be paid directly to the trial lawyers" in the form of legal judgments for their clients.

Holden "is not dealing with a serious problem in a serious way," said Byrd, an attorney and chairman of the House Judiciary Committee.

The Insurance Department report attributed the rising malpractice premiums to a normal fluctuation in the insurance market. Competition drove rates lower in the 1990s, the report said. When several malpractice insurers went insolvent or pulled out of Missouri, rates shot back up as the remaining companies struggled to take on the caseload.

Whereas there were eight insurers offering malpractice coverage in Missouri last year, there now are just three selling new policies.

The Insurance Department report also recommended legislation allowing the department to reject proposed rate increases that are based on national trends instead of Missouri data.

Byrd has proposed something similar, but also wants to give the Insurance Department more authority to regulate rates.

Other recommendations by the Insurance Department would prohibit insurers from imposing a surcharge on medical providers that have a pending malpractice claim and would require 60 days notice from insurers before they change rates or drop coverage.