QUESTION 4: INSURANCE RATES

Thursday, Oct. 14, 2004 | 1:21 a.m.

Question 4 is being described alternatively as a consumer advance or a great hoax.

If the measure is approved by the voters this year and again in 2006, it would change the state constitution to require insurance rates on such things as autos, homes and businesses be reduced by 20 percent. Insurance companies would also be required to give good drivers an additional 20 percent reduction.

If insurance companies did not lower their medical-malpractice insurance for doctors by 10 percent, the 2002 law putting restrictions on lawsuits against physicians would be repealed.

If insurance companies are not making a profit, the reduction would not be allowed, according to Gail Tuzzolo, a spokeswoman for Question 4, which was generated by trial attorneys in the state.

"This is a consumer measure," Tuzzolo said, adding that insurance companies were forgotten in the battle over medical-malpractice lawsuits waged between lawyers and doctors. "Nobody has pointed the finger at the insurance companies."

Tuzzolo of Las Vegas says the insurance companies are earning more than 20 percent and can afford the reduction.

But James Wadhams, a Las Vegas lawyer and lobbyist for insurance interests, says the companies are not making a 20 percent profit. Wadhams, a former state insurance commissioner, said passage of Question 4 would "likely push the rates up rather than down."

Wadhams and Scott Craigie, a representative of the Nevada Medical Association, said there is a section in the proposed constitutional amendment that requires the state insurance commissioner to allow the companies to earn a "fair rate of return" or profit.

That is what Insurance Commissioner Alice Molasky-Arman does now, Craigie said.

The law now says the division must make sure the rates by insurance companies are not too high or too low.

Janice Moskowitz and Chuck Knaus of the state Insurance Division said that auto insurance companies, which currently average a 15 percent return, would find themselves taking a 5 percent loss because of the reductions.

"There isn't much fat in them (auto rates)," Knaus said.

Wadhams noted that a law passed in the 1989 Legislature similar to the initiative was struck down by the 9th U.S. Circuit Court of Appeals.

"You cannot force insurers to stay in business at a loss," Wadhams said. He said if this law is passed, the insurance companies would apply for rate increases before the effective date to offset any rollback.

But Tuzzolo said the provision that allows companies to keep their rate structures if they are not making a fair profit makes Question 4 constitutional.

Craigie said this issue is a smokescreen to repeal the medical-malpractice reforms enacted during the 2002 special legislative session. Those included putting a $350,000 cap on pain and suffering awards for victims of medical malpractice.

"This is all about the trial lawyers using a bait and switch to get the people to vote for a program that completely undoes the medical-malpractice reforms in Nevada," Craigie said.

Tuzzolo argues that Nevadans in 2002 gave up some of their rights to help doctors get lower rates on malpractice insurance. The rates never came down but instead kept climbing for doctors.

This proposal, she said, is a "hammer" to get the insurance companies to lower their rates at least 10 percent to help the doctors. If the companies don't reduce rates, then citizens should have their rights restored, she said.