Medical liability insurance premiums on the rise

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Medical liability insurance costs are going up for the fourth year in a row, according to a new analysis by the American Medical Association (AMA).

The prevalence of year-to-year increases in medical liability premiums from 2019 to 2022 has not been observed since the early 2000s, according to AMA. That comes after a relatively stable period from 2013 to 2018.

“There is a growing consensus that a hard medical liability insurance market exists in a considerable number of states and is slowly spreading across the U.S. as more physicians face higher insurance premiums,” AMA President Jack Resneck Jr., MD, said in a statement. “For physicians who can still obtain coverage in a hard market, the skyrocketing costs may force physicians to relocate away from certain high-cost states or drop certain critical services that raise their liability risk. These tough choices can lead to reduced access to care for patients.”

The latest push upward began in 2019 when the proportion of premiums that increased was about 27%, almost double the rate from 2018. Between 2020 and 2022, roughly 30% of premiums increased year-to-year, the AMA news release said.

The proportion of premiums with increases in 2022 was 36.2%, a higher rate than any other year since 2005, and in 2022, the average premium increase was 8.1%, according to AMA. The report is based on three specialties: internal medicine, general surgery, and obstetrics/gynecology.
The timing of the latest increases matches that of the COVID-19 pandemic, but the effects of the pandemic on the premiums have been “largely inconsequential,” said the Policy Research Perspective analysis by Jose R. Guardado, PhD. In 2020, the pandemic produced a temporary reduction in health care provided, which meant lower risk of claims, so some insurers offered premium discounts, rebates, or special dividends, the report said.

The current hard market is not as severe as the one 20 years ago, and the current market may not reach the same levels, Guardado wrote. There are at least two differences between the current market and that of the early 2000s:

The industry is in a better financial position now.

Demand for medical liability insurance is down because more physicians are employed by health care entities, so there are fewer independent physician practices who could become new customers. “An important question is whether the market will continue to shrink,” Guardado wrote.

The hard market conditions of the early 2000s led to tort reform that “proved to be a key contributor in stabilizing medical liability insurance premiums,” according to AMA.

“However, over the past decade, some of those reforms have been overturned in various states, opening the door for increased claims severity and frequency,” the AMA statement said.

Location also makes a difference, with the latest analysis showing “striking differences” in premiums by geography. For example, in 2022 some obstetricians and gynecologists faced base premiums ranging from $49,804 in Los Angeles County, California, to $226,224 in Miami-Dade County, Florida, according to AMA.

The data comes from the annual rate survey of the Medical Liability Monitor and represents manual premiums. Guardado noted those could differ from the final costs that physicians pay.