Going "Bare" No Longer Viable Option
Going "Bare" No Longer Viable Option | Michael Lowe, Robert White, Jonathan Katz, Oros Risk Solutions LLC, First Professionals Insurance Company, FPIC, Florida Physicians Insurance Company

Jonathan Katz, Orlando-based Oros Risk Solutions LLC President

Multiple Factors Make It Unfavorable

At first glance, it appears that an interesting side effect of the 2005 constitutional amendment that put the 3-strikes rule into play involves medical malpractice rates dropping substantially.
But the recent trend has little to do with the 3-strikes rule, say industry experts, who point to cyclical tendencies, tort reform, and fewer claims as contributing factors to the favorable rate adjustment. 
In the early 2000s, medical malpractice premiums had skyrocketed. Conservative estimates placed "bare" Florida doctors as high as 35 to 40 percent, with the greatest concentration of physicians without medical malpractice insurance coverage located in Broward-Dade-Palm Beach counties, which has a heavy dose of physicians practicing high-risk specialties.
"I don't think the 3-strikes rule had an effect on med-mal premiums," said Jonathan Katz, president of Orlando-based Oros Risk Solutions LLC."Having fewer claims has been the primary contributor to the rates being lower than anything else."
Going "bare" is no longer a wise choice, Katz pointed out.
"It was never a good idea, but it became much worse after the new bankruptcy laws went into effect a few years ago," he said. "Before, doctors thought they could use a combination of going bare, asset protection and bankruptcy to beat having to pay large judgments. This was only somewhat true. Florida statutes require that bare doctors with a judgment against them must pay the first $250,000, regardless of asset protection, and the Department of Medicine may have their license revoked for five years at a time until they pay. Also, bare doctors must pay to defend themselves, which can be quite substantial."

The Showdown  

During the height of tort reform in Florida, it became clear that plaintiff attorneys, who appear to be more organized than medical doctors, exerted more clout. Their campaign for the 3-strikes rule was in rebuttal to doctors' groups proposing an amendment to the Florida constitution imposing caps on plaintiff's lawyers' fees. The trial lawyers' campaign to consumers painted a picture of doctors driving luxury cars, playing golf, and generally exuding behavior inherent of the rich and greedy.
Yet during the medical malpractice insurance crisis that was happening before the amendments, Florida doctors, especially those in high-risk specialties, began retiring earlier, leaving the state, or declining to perform high-risk procedures. As this realization became clear, the public's mindset seemed to shift. Doctors, especially family practitioners, were viewed more realistically—as citizens who drove Hondas, lived in the same neighborhoods, and moved in the same social circles.
"Even though the suits brought against doctors that cost $1 million or more have remained fairly constant, the number of claims is down. We're seeing more empathy from patients, who are less likely to sue for frivolous reasons. Also, costs have gone up for plaintiff attorneys," said Katz. "We saw the pendulum effect."
And even though voters also approved an amendment in November 2004 calling for a cap on attorneys' fees (Article 1, Section 26), trial lawyers found a loophole. They began requiring clients to sign fee cap waivers—before taking their case. 
"When tort reform negotiations were ongoing, I'd hoped to see state lawmakers approve legislation patterned after California's medical malpractice tort reform that was passed in 1976," said Katz. "Theirs has been very successful. The cap on plaintiff's attorneys' fees is the same, whether $2 million or $20 million is paid out. It's good for the consumer, who's not at risk of getting gouged."

Bigger Picture

Medical malpractice rates are down significantly because claims frequency has fallen dramatically since October 2003—before voters passed the 3-strikes amendment, said Robert E. White, Jr., president of First Professionals Insurance Company (FPIC), formerly known as Florida Physicians Insurance Company.
"Claims frequency started its dramatic drop more than a year before the amendment passed," said White. "The fact is that claims frequency is down in every state in the United States since 2002, regardless of whether the state has adopted tort reform or not." 
White surmises that claims frequency has declined substantially because attorneys have found the economics of pursuing these cases to be challenging, and fewer plaintiffs' lawyers will take these cases because of the high cost of prosecuting them.
The passage of tort reform in 2003 may have also impacted the desire of Florida plaintiff's lawyers to take these cases because of limits on recoveries that now exist, suggested White.
"The low limits of coverage Florida physicians carry also places an artificial cap on the recovery that can be made, and all of these things add up to make other tort cases more attractive to pursue from an economic perspective," he said. "Again, we point to the fact the claims frequency is down all across the United States and this fact points to a broad, systemic factor—like how the plaintiff's bar views these cases as opposed to factors like a state adopting tort reform as the cause for the decline in claims frequency. States that haven't changed their laws in 30 years and states that have never adopted a single stitch of tort reform have experienced lower frequency of claims against physicians since 2002."
While the insurance business does have a cyclical nature, what the insurance industry is experiencing now is not related to the cycle, White pointed out. 
"If frequency goes up and rates decline or stay stable, then one could make the argument that this is cycle-related as rates have currently caught up to the decline in frequency," he explained.

Bottom Line

Only about 7 percent of cases are tried to a conclusion, White noted, leaving 93 percent of the cases resulting in a settlement with the patient, or are dismissed with no payment before trial. "That number has been fairly consistent for a number of years and hasn't changed much," he said.
Even though rates have decreased 33 percent since 2006, White said he hasn't seen the number of bare doctors decrease appreciably. 
"The fact that insurance is more affordable today than it was five years ago has not caused bare doctors to return to the marketplace," he said. "That's because many of them believe that carrying insurance makes them a target for a lawsuit.  The plaintiff's bar has begun to recognize the monster they created because they don't sue bare doctors, as they feel they cannot recover for their client."
White said that trend may be shifting. 
"Recently, we've heard that plaintiff's lawyers are now suing bare doctors and recovering," he said. "We've heard of four cases recently where bare doctors settled for amounts ranging from $100,000 to $250,000, and had to pay significant sums to defense lawyers and experts."
Michael Lowe, a board-certified healthcare attorney based in Orlando, said the legal environment involving healthcare providers runs deeper than industry cycles and trends. It's exacerbated, he pointed out, by problems plaguing the nation's embattled healthcare delivery system.
"If true healthcare reform is to take place," he emphasized, "then we've got to have true tort reform first."