Volume 2, No. 3 • Fall 1987

CA Insurer Notes Fewer Claims, Lower Premiums

Joseph D. Sabella, M.D.

This discussion considers the medical malpractice problem from a perspective that is only a dozen years old and is the hybrid offspring of the marriage of medicine and insurance. The origin of this union was Malpractice Crisis Number One of the mid’-70s, brought about by the shrinking availability of insurance as commercial insurers Red the marketplace, and by decreasing affordability as others raised premiums to startling multiples of three, four, and even five times the previous levels.

An important outgrowth of Crisis Number One was the creation of a number of doctor-owned medical malpractice insurers throughout the country. These now number 40 at last count and insure more than half of all practicing physicians. In 1976, an unknown wag labeled doctor-owned insurers, somewhat indelicately and disparagingly, Bedpan Mutuals.

Our company, The Doctors’ Company, is an interinsurance exchange owned by its members and is the offspring of a political action group organized early in 1975 that was called the California Physicians Crisis Committee (CPCC). The CPCC created a coalition of medicine, business, labor unions, the aged, welfare groups and consumer organizations, and it was this coalition that served as the catalyst for the enactment in the fall of 1975 of the reforms of California law pertaining to medical malpractice.

Anesthesiology was a specialty in severe crisis 12 years ago. Premiums were skyrocketing and no end seemed to be in sight. In 1975, we created an endorsement for the policies of our anesthesiologists that required two simultaneous methods of basic intraoperative monitoring, temperature monitoring in children, and forbade the anesthesiologist from leaving the room unless someone of comparable competence took his or her place.

Moreover, anesthesiologists themselves recognized that they would have to participate in controlling their own loss experience if they were to remain an insurable specialty. Their participation reached its logical conclusion last year when the American Society of Anesthesiologists created concrete, sophisticated standards of practice for intraoperative monitoring for its membership. We are currently in the process of incorporating the ASA’s standards into our own anesthesiology policy endorsement.

There have been major improvements in anesthesia claims, which has resulted in a relative decrease in malpractice insurance premiums for anesthesiologists. In 1976, our over-all average premium was $9,743 and the premium for anesthesiologists was $15,389. In sharp contrast, in 1987, the over-all average physician’s premium in California is $19,597 but that for anesthesiologists is only $16,199. The insurance cost to anesthesiologists, which is now substantially below our average premium, reflects a remarkable turnaround in anesthesiology’s loss experience.

Dr. Sabella is President and Chairman of the Board, Re Doctors’ Company. This article was excerpted from a presentation, “Composite Medical and Insurance View of the Professional Liability Problem”, given at the 27th Annual Conference of THE AMERICAN COLLEGE OF LEGAL MEDICINE, March 7-9, 1987, Long Beach, California.