Consumer Watchdog Reports: Rate Challenge Under Proposition 103 Blocks Medical Insurance Exchange of California's Medical Malpractice Rate Hike Proposal; Doctors & Providers Save Over $2.8 Million

LOS ANGELES, Feb. 22, 2023 /PRNewswire/ -- In response to Consumer Watchdog's challenge to Medical Insurance Exchange of California's ("MIEC") proposed rate increase on doctors' and medical providers' medical malpractice insurance, MIEC has agreed to cut the average overall rates it charges by 7.2% and to pay special dividends to its members refunding 4.4% of premiums paid for policy years 2021 and 2022.

Under the agreement reached by Consumer Watchdog, MEIC, and the California Department of Insurance, over 1,100 doctors and other healthcare provider policyholders will save $1.41 million in annual premiums under the approved rates as compared to the rates originally requested by MIEC. The special dividends will result in an additional $1.44 million being returned to the pockets of about 4,000 MIEC policyholders.

"Medical Insurance Exchange's agreement to reduce its 2023 rates and refund additional premiums for 2021 and 2022 is further proof that Proposition 103's insurance reforms, and not California's malpractice damage cap, have held down medical malpractice and other insurance rates since the initiative passed in 1988," said Consumer Watchdog staff attorney Daniel L. Sternberg.

Prior to agreeing to reduce its 2023 rates, MIEC sought to withdraw its rate application and continue charging its current rates. The company claimed that historic legislation signed by Governor Newsom in May 2022 updating the malpractice damage cap under the state's Medical Injury Compensation Reform Act (MICRA) would result in significant losses to the company. However, the malpractice insurer failed to provide any specific data or analysis in support of these claims, and the company's own data showed a rate decrease was warranted.

The legislation updates the cap on noneconomic damages in malpractice cases for the first time in 48 years and restores families' access to justice by:

• Increasing the cap to $500,000 for wrongful death cases and $350,000 for injury cases as of January 1 of 2023.
• Raising the cap in increments every year for ten years, until it reaches $1 million for wrongful death cases and $750,000 for injury cases in 2033. 
• Allowing for up to three separate caps in cases when multiple providers and institutions are responsible. 
• Increasing the cap by 2% every year starting in 2034. 

Rate regulation under Proposition 103 requires insurance companies to open their books and justify rate increases before they can take effect, preventing insurers from charging excessive premiums. According to insurance rate data analyzed in a Consumer Watchdog report, malpractice insurance rates increased 450% after MICRA was enacted. Rates dropped 20% and then stabilized after Prop 103 was enacted in 1988.

Read the report Rate Regulation: The Rx for Medical Malpractice Insurance Rates (2013):

Under voter-enacted Proposition 103's rate rollback requirement, four of the state's largest malpractice insurers – MIEC, Norcal Mutual, SCPIE, and The Doctors Company – refunded over $73 million in premiums directly to doctors and other health service providers by 1993. See, p. 6, Table 3 of the report.

Proposition 103 also allows consumer groups like Consumer Watchdog to challenge rate hike proposals and request public hearings. Since 2002, Consumer Watchdog's challenges to excessive malpractice rate increases in California on behalf of physicians, nurses and dentists proposed by medical malpractice insurers have resulted in over $81 million in premium savings, including this latest MIEC challenge. See https://www.consumerwatchdog.org/prop-103-california-insurance-reform

SOURCE Consumer Watchdog