More rate cuts not expected

Thursday, Jan. 23, 2003 | 11:12 a.m.

A physician-owned company that is lowering prices on medical malpractice insurance premiums for some obstetricians said it did so largely because three local hospitals have been willing to share the risk of malpractice lawsuits.

But Chip Wallace, spokesman for the nonprofit Nevada Mutual Insurance Co., said Wednesday that he doesn't expect any further rate reductions in the immediate future unless Nevada adopts tougher malpractice litigation laws that reflect those enacted in California.

"The closer we get to that, the closer we're going to get to the insurance industry opinion that rates can be lowered," Wallace said.

It was announced Wednesday that the Nevada Insurance Division approved rate adjustments that Wallace said will take effect by Feb. 1. Wallace said his company covers 18 OB/GYNs in Clark County and 20 statewide. Hopes are that incentives built into the rate adjustments will encourage doctors to stay in town and deliver more babies.

While an undisclosed number of physicians will receive rate decreases of 16 percent to 33 percent, those will be offset by a 12 percent increase that will be borne by other obstetricians. The rate adjustments will depend on the number of babies a doctor is willing to deliver.

John Nowins, president of the Clark County OB/GYN Society, applauded the news that some rates would be lowered.

"That's good news for those doctors" who are covered by Nevada Mutual, Nowins said.

Sunrise Hospital and Medical Center, Sunrise Children's Hospital and MountainView Hospital, all owned by HCA, recently reached an agreement with Nevada Mutual to share litigation risk with obstetricians who are insured by the company and who are sued for work done at those hospitals or in their private practices. HCA and Sunrise Hospital helped provide the seed money that led to the insurance company's formation.

"Certainly we have a vested interest in keeping doctors here," Sunrise spokeswoman Cheryl Smith said. "We have to find ways to make sure they want to stay."

The arrangement between the hospitals and Nevada Mutual prompted at least one Las Vegas obstetrician, Dr. Anthony Ibay, to leave his old insurance company and join Nevada Mutual.

Ibay, who paid $33,000 for insurance last year, said that had he stayed with American Physicians Assurance he would have paid $100,000 to $150,000 this year, even though he has never been sued for malpractice. Insurers in Nevada and elsewhere announced last year they were going to raise their rates significantly because of higher litigation costs coupled with steep losses in bond and stock investments.

Local doctors complained that their malpractice insurance premiums had skyrocketed to a point where many were forced to go out of business or leave the state. That led Nevada lawmakers last summer to pass legislation in special session to make it tougher to sue doctors for malpractice, though physicians are asking legislators this year for even tighter reforms in an effort to lower insurance rates.

"You didn't see the insurance industry jumping out and lowering rates because Nevada didn't go to the gold standard," Wallace said in comparing Nevada's law to California's, which has a lower cap on pain and suffering damages.

Ibay's premiums will still climb to $66,000 with Nevada Mutual this year but that is far less than he would have paid had he stayed with American Physicians Assurance, he said.

Under his arrangement with Nevada Mutual, Ibay said he'll have to pay a $50,000 deductible if he gets sued for work performed at hospitals other than Sunrise or MountainView. He said that if he is sued for work at Sunrise or MountainView, he won't have to pay any deductible.

"Right now any decrease in rates to keep a business going is a good thing," Ibay said. "Obviously, any lower rate would be beneficial to me but there are also stipulations because it amounts to a contract with Sunrise.

"What I like about Nevada Mutual is that it is owned by the (physician) members and they're very selective about who they take in. Other insurers are not as selective and take on more risk."

Nevada Mutual is among those companies that had required local obstetricians to pay a surcharge on their standard insurance rate if they delivered 125 babies a year or more. This was based on the theory that doctors who delivered more babies were taking on more risk of getting sued, justifying the higher insurance premiums.

The new rate schedule now provides discounts for higher numbers of deliveries. Doctors who deliver 125 to 175 babies annually will see their rates drop 16 percent. The rate decrease will be even higher for obstetricians who deliver 175 to 225 babies (33 percent), 225 to 240 babies (31.2 percent), 241 to 260 babies (28 percent), 261 to 280 babies (24 percent) and 281 to 300 babies (20 percent).

Obstetricians who used to deliver less than 125 babies will experience a 12 percent rate increase but will now be able to deliver up to 224 babies without paying an additional surcharge.

Nowins and other obstetricians had complained that 125 deliveries was an arbitrary cutoff point for an insurance surcharge and discouraged them from delivering more babies.

"The company is adjusting its rates because there is no actuarial support for them telling us what we can and cannot do," Nowins said.

An official with American College of Obstetricians and Gynecologists in Washington, which sets the nation's medical standards for the delivery of babies, agreed that 125 was an arbitrary number of deliveries.

"It's general knowledge that 125 is a low number per year on average," the official, who requested anonymity, said. "A more appropriate number is 225."

The new Nevada Mutual insurance rates are based on a standard charge of $135,729 a year for a physician with $1 million in liability coverage per incident or $3 million total. Wallace said that rate can go up or down sharply depending on such factors as the physician's professional experience and number of lawsuits filed against him.

"Most doctors have stayed away from Nevada Mutual because their rates were so high," Janice Moskowitz, an insurance division actuary, said. "This may change their minds. This was set up so that it would be rate-neutral overall based on existing business. But we hope it will allow the number of deliveries to go up so we look at it as beneficial overall."

Wallace said the rate adjustment is an example of how an insurer can make a beneficial arrangement with the medical community.

"We are committed to Las Vegas doctors," Wallace said.