Medical Negligence Insurer Posts Record Profits
Experts agree that Illinois' recent cap on medical negligence lawsuits has yet to have an impact on lawsuits, but that didn't stop the state's largest medical negligence insurer, ISMIE, from posting record profits, bolstering arguments that the cyclical nature of the insurance industry -- low profits from investment holdings and high premiums, followed by high profits from investment holdings and premium reductions (see graphic at left).
From Crain's Chicago Business:
The state's biggest malpractice insurer has posted its biggest profit since the 1980s, increasing pressure on the company to cut rates that have surged in the past five years.
Doctors who lobbied alongside ISMIE Mutual Insurance Co. two years ago to persuade Illinois lawmakers to limit jury payouts for malpractice victims are still awaiting a break from lofty premiums. ISMIE's $50-million profit and CEO Alexander Lerner's $1-million pay in 2006 puts the rate issue back in the spotlight.
"They're making a lot more money now, and we still haven't seen our rates go down," says Ellen Brull, a partner at a family practice in Niles who has seen her base insurance rate almost double since 2003 to $19,373 last year. "I would expect major reductions." [....]
The brightening financial picture for ISMIE mirrors a national trend: a drop in physician malpractice lawsuits, reflected in the insurers' bottom lines and reduced premiums. That has led critics of the Illinois malpractice caps to assert that the cyclical nature of the insurance business — not a spike in gratuitous jury payouts — were to blame for the rate crisis. In 2005, state lawmakers capped pain-and-suffering judgments against doctors at $500,000 a case and against hospitals at $1 million.
This article from a pro-business publication is yet another eye-opener for those doctors still gullible enough to believe that medical negligence costs have anything to do with rising premiums. The article notes, for example, that ISMIE CEO Mr. Lerner received a 2% raise this year, boosting his salary to a cool $1 million, and three other executives made at least $747,000. Doctors should remember that every time they look at their insurance bill.
12 comments:
Lap Dog, er Yellow Dog:
Read all the way down the article. ISMIE will meet to decide rates for this next year at the end of April. So there could still be a rate reduction this cycle. It's too early to tell.
Second point: ISMIE had record profit, but it will be paid out in a dividend. So, who's "reaping the profits", it's an policy-holder-owned company?
Third point: You criticize the salary of the CEO. What does the CEO of the ISBA malpractice insurer make? What about other med mal insurers? What about other legal mal insurers? Context would help your arguments.
Fourth point: The article says, "ISMIE's annual report, filed with state regulators last month, shows a record high for the surplus it sets aside to settle future claims: $294 million as of yearend 2006, up 25% from the previous year. Claims paid in 2006 ticked 7% higher, to $151.9 million; total premiums dipped 5% to $386 million."
As I understand it, the regulatory body sets the surplus amount, and an increase would indicate an increase in future claims, right? And, was the increased profit before they paid into their reserve, or after?
Only you would ignore a 5% decrease in revenues from policy holders, ignore a $50-60 million increase in "reserve", which is set by the state regulator, and then criticize a 2% increase in salary (that's $20,000 total) to the CEO and then cry foul.
I wonder what the bonuses that were paid out at some of the top Chicago class action firms this past year? That is, if we're sitting around criticizing net incomes.
Interesting.
How did the plaintiffs' lawyers do during the same time?
Did any of them have to sell their third and fourth homes, or their boats, or their BMWs?
Looks like everybody but the doctors and the patients is getting rich in the current system.
Skeeter -
We agree on many points, but there's one on which we can't disagree: doctors, not lawyers, are the highest paid profession in the U.S., and in Illinois. I would bet, too, that ISMIE CEO Howard Lerner pulls down more each year than 90% of the trial lawyers in Illinois.
On the second point, we may agree or disagree. Doctors provide a valuable service to society. So too, do lawyers. It's easy to demonize lawyers -- until you need one. But just as many doctors provide valuable community and international service, through organizations like Doctors Without Borders, many law firms provide millions of pro bono legal assistance to the poor, and in the wake of scandals in Abu Grhaib and Guatanomo, it was the nations biggest law firms that stepped up to provide free legal aid to illegally detained prisoners (something the Bush White House tried to blackball them for).
Please, please tell me: what community service does ISMIE provide? Why is it that doctors who practice in Florida can get the equivalent of a "safe driver discount" of as much as 7% on their premiums after only five years, but in Illinois you have to have a spot-free record for a decade, and then the discount is only 1%? Is ISMIE serving the best interests of good doctors by forcing them to underwrite the handful of doctors responsible for the bulk of negligence? I don't think so.
Unfortunately, we have a situation in Illinois where one insurance company has cornered the market on medical negligence insurance, and has also established a monopoly hold on insurance regulation in Springfield. However noble the intentions of its founders, ISMIE has lost its way, and it now behaves as monopolies inevitably due: high rates, poor customer service, and a limited amount of choices.
Anonymous -
Your ridiculous name-calling aside, I'm on the side of the doctors on this one.
Who's reaping the profits? Clearly, Mr. Lerner. He walks away with a million dollars. Is that a grotesque salary for a non-profit organization that's supposed to be operating in it's rate payers best interests? I think so. Do most doctors think that's a grotesque salary at the same time their rates are being jacked through the roof? My doctor thinks so, but you'll have to ask your doctor. Clearly, the doctor interviewed in this article thinks she's due for a big rebate.
I think what will ultimately see here is the same scam we see from the big oil companies on an annual basis. Yes, rate payers will see a rebate, but just like every "gas crisis," the rebate won't even bring prices close to "pre-crisis" levels. Instead, ISMIE will rebate doctors somewhere between 3-5%, because a rebate was ordered by the Illinois Department of Insurance long before these record profits became public. Then they'll pat themselves on the back, and business-as-usual from the insurance industry will continue.
YDD,
I have nothing against lawyers generally. There are some good and some bad.
I am bothered by the excesses of the fees. Why should the PI attorney make 40% of a verdict or settlement? That is a lot of money. PI attorneys should not lecture anyone about excess profits. Also, you mention pro bono work. I may be mistaken, but when I see the lists of top firms doing pro bono work, it always seems that the big corporate firms are at the top of that list. If the plaintiff's PI guys do it, they apparently are humble enough to not accept publicity.
With regard to salaries: The person you mentioned is at the top of the insurance ladder. His salary is nothing compared to what I suspect the top PI attorneys make.
People at the top make money. Welcome to America.
Any results from the new medical malpractice company formed by the attorneys?
Skeeter - On this we can agree: lawyers are just like every other profession -- doctors, teachers, police, priests -- most are great people who work hard, but in every profession there are a few bad apples who tarnish the reputations of everyone else.
As for how attorneys are compensated, keep in mind:
If a trial lawyer loses a case, they don't get paid, no matter how much work they did;
Even when they win, they still have to pay their staff and all the related expenses of putting on a case before they collect a penny;
80% of lawsuits filed in Illinois are for $50,000 or less in damages;
YDD,
If I suffer $12 million in damages, my attorney should take 40% just because he also takes losing cases?
You think that is a fair system?
It punishes those who are genuinely damaged due to the negligence of others in order to attempt to help those who are found by juries not be either genuinely injured or who's injuries are not caused by the negligence of others.
Also, the "expenses" come out of the plaintiff's pocket. Transcripts, filing fees, expert fees, travel costs for the attorneys -- all are deducted from the plaintiff's share. The plaintiff pays for those things. The attorney pays for his office space and his staff and that is about it.
I can see how this industry is booming with all the malpractice in our societies today. I recently suffered from Medical Negligence and needed the help of a lawyer, Its a good job there are some decent ones around, given the amount of cases arising at the moment.
How has this affected large insurance firms with their international profit? Associate professor of public policy at the University of California, Katherine Baicker, co-wrote a paper on liability costs and Medicare with some decent information. Between 1993 and 2001 malpractice payments went up by ~12% and premiums went up by ~8%. It seems obvious to me that with malpractice claims going up faster than premiums it is going to cut into insurer’s profits. She was talking about claims for the States if I remember correctly and not on an international level.
AIG is having trouble with their profit Associates professor whatshername should write on that
Reuters denounces both Presidential candidates health care proposals:
"Democratic presidential candidate Barack Obama's health care plan would cost too much and create more regulation, while Republican John McCain's plan would leave 60 million Americans without health insurance and reduce coverage."
Obama’s plan would gouge the profit out of the industry. McCain’s plan would leave the lower class without insurance and business without profit. Associates professor Baiker now of Harvard, says Obama’s plan would hurt women and minorities most cutting out 224,000 low-wage jobs.
Also, Health Affairs says that McCains plan would encourage Americans to move to an international market for non group insurance.
Make that "National" instead of "International" in the last sentence of my comment.
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