side note: Wow! I found this to be a surprise. Even with the investment sector still moving in relative chaos, the highly respected Standard & Poor’s Rating Service is forecasting a continued soft market for medical liability insurance. What does this do to the argument that medical malpractice insurance rates are climbing unchecked through the roof?

The medical malpractice insurance market appears likely to soften more, as insurers continue to battle what one ratings service calls “significant challenges.”

Standard & Poor’s Ratings Service is forecasting that the market will continue to soften as prices declined at a more moderate pace.

The ratings service notes that medical malpractice insurance writers apparently achieved better operating results in 2008 and through the first nine months of 2009 than it had forecast two years ago because of
larger-than-expected favorable reserve development.

“Even without the ups and downs of the pricing cycle, medical malpracticeinsurers face significant challenges, including volatile losses, the long-tail nature of the reserves and exposures, and the potential for adverse legal verdicts,” Standard & Poor’s said in a statement. “We have only seen a handful of insurers sustain profitability throughout pricing cycles, and they have generally been the larger, more diversified insurers in a highly fragmented industry.”

The ratings service said it expects many medical malpractice monoline companies to ultimately report a stable or improved combined ratio for 2009, mainly because of reserve releases, a trend it anticipates will continue through 2010 and mitigate the expected decline in prices.
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side note: Here is an updated report on tort reform from the Congressional Budget Office.

The Congressional Budget Office (CBO) recently analyzed the budgetary effects of tort reform proposals to limit costs relating to medical malpractice. In a previous analysis, the CBO predicted that implementation of the package of tort reforms would reduce the use of health care services and, therefore, health care spending. Recently-acquired evidence further supports the hypothesis that tort reform would slightly reduce the use of health care.

Originally, the tort reform proposals were estimated to decrease spending by roughly $41 billion and increase revenues by roughly $14 billion from 2010 to 2019. The latest estimates are substantially larger than earlier estimates for several reasons: (1) tort reform would have a greater effect on malpractice costs than previously estimated; (2) tort reform would result in a slight reduction to the utilization of health care services resulting from changes in providers’ practice patterns; (3) the effect of reduced health care spending on revenues would be greater than previously predicted; and (4) the reduction in utilization is projected to generate a proportionately larger reduction in federal spending on health care than in other spending in health care.

The CBO previously estimated that imposing limits on patients’ lawsuits involving harm from negligent health care might have a negative effect on health outcomes. However, the available evidence on the subject is mixed, and the correlation between errors and malpractice claims is weaker than previously assumed. According to one study, a majority of hospital patients who were negligently injured never filed complaints; and a substantial number of filed claims involved health problems not caused by negligence.

The estimates of the likely effects of tort reform are based on Research that links changes in malpractice costs to changes in health care spending. Examples of changes in spending include changes caused by providers’ responses to changes in the medical liability environment and also the spending changes resulting from associated changes in health status. Taking into consideration all of those factors, the weight of evidence indicates that tort reform would reduce the utilization of health care services and, therefore, spending. However, spending might increase for certain patients, providers, or procedures, while decreasing for others.

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side note: The section most appropriate for this blog’s readership comes after the jump; dealing with the Health Insurance Industry Antitrust Enforcement Act of 2009.

The Congressional Budget Office released an analysis undertaken with the staff of the Joint Committee on Taxation (JCT) on how the Patient Protection and Affordable Care Act, H.R. 3590, would affect premiums paid for health insurance in various markets.

The nongroup (individual) market would have the most significant effect, growing in size under the legislation but still only 17 percent of the overall insurance market by 2016. Under legislative change, the cost for individual policies would be about 10 percent to 13 percent higher in 2016 than the same coverage in 2016 under current law. However, more than half of the enrollees in these policies would receive federal government subsidies (for those individuals and families with income between 133 percent and 400 percent of the federal poverty level (FPL)). When those subsidies are taken into account, the enrollees’ cost for the subsidized policies would be around 56 percent to 59 percent lower than the same nongroup premiums charged under current law.

The CBO and JCT also stated that a majority of persons who have health coverage from their employers will see little effect–either no increase or a reduction in premiums. The small group market (defined by the analysis as employers with 50 or fewer employees) CBO and JCT estimate that the change under the legislation in the average premium per person would likely range from a one percent increase to a two percent reduction of in 2016, compared to the same premium prices under current law. In the large group market (50+ employees), the premium cost would be likely zero to three percent lower in 2016 (compared to that under current law).

About 12 percent of those in the small group market would benefit from the small business tax credit on the cost of purchasing insurance under the legislation, with a lowered cost of between 8 percent to 11 percent lower compared with the same premium cost under current law.
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