Texas liability reforms spur plunge in premiums and lawsuits

Doctors attribute reduced medical liability insurance rates and an influx of specialists to the caps enacted five years ago. A legal challenge threatens to undo the reforms.

By — Posted Sept. 8, 2008

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When general surgeon Dino Saracino, MD, watched his liability insurance premiums spike 30% per year over 10 years while practicing in Bedford, Pa., he knew he had to make a move.

The annual expense had mounted to $80,000 by 2004 and took a toll on Dr. Saracino, who often handled additional pediatric or critical care cases because he was the only general surgeon in the rural county.

When Texas voters in 2003 approved a constitutional amendment limiting noneconomic damages in medical liability cases to $250,000 for physicians, Dr. Saracino saw a break. In 2004, after considering other areas, Dr. Saracino applied for a medical license in the Lone Star state. Meanwhile, Pennsylvania, which has no cap, would become home to some of the highest medical liability insurance rates in the nation.

Despite a yearlong delay for license approval and the work of establishing his practice in El Paso, "it was absolutely worth the wait," said Dr. Saracino, whose insurance premiums are about a quarter of what he paid in Pennsylvania.

"I can spend more time with patients because I don't have such a high fixed expense to generate by seeing a certain number of patients or doing a certain number of procedures. And I don't have to do all the things I was responsible for before because of the availability of other specialists," he said.

As Texas marks the fifth anniversary of tort reforms this month, scores of doctors continue to chart paths similar to Dr. Saracino's. From drastic cuts in liability insurance rates to a record influx of doctors, physicians attribute a marked improvement in access to care to the 2003 reforms. Those reforms limit noneconomic damages but do not cap economic awards.

Texas followed in the footsteps of California, which, since 1975, has had a similar award limit that is credited by doctors for stabilizing the medical liability climate there.

Wisconsin was the most recent state to enact a noneconomic damage limit, at $750,000 in 2006. North Carolina in 2007 passed a $1 million limit on total awards in cases that go to arbitration. Colorado doctors fended off efforts to raise the state's $300,000 noneconomic cap earlier this year.

"This just shows that the answer to the question of 'do caps make a difference' is absolutely they do," said AMA President-elect J. James Rohack, MD, a cardiologist in Bryan, Texas. "Clearly, the Texas model shows that what California experienced can be reproduced."

Texas doctors have seen a 25% overall drop in medical liability rates since 2003, according to state insurance department data.

During that time, Texas Medical Liability Trust, the state's largest medical liability carrier, experienced a 50% reduction in lawsuit filings -- a first for the company, president and CEO Bob R. Fields said. In addition, more than 30 new competitors entered the state, up from just four in 2003.

Texas Medical Assn. President Josie R. Williams, MD, said the liability improvements have delivered on their promise to help stem the exodus of doctors from the state and recruit new ones.

Though Texas still falls short of the national average for physicians per capita, "what this does is give people access to physicians, when before, many quit seeing some patients. And we now have physicians in [underserved areas] again taking care of high-risk [cases]," Dr. Williams said.

Medical license applications jumped 58% from 2,561 in 2003 to 4,041, an unprecedented number, according to the Texas Medical Board. The state saw a 7.2% growth in the number of ob-gyns between May 2003 and May 2008. Similar increases were observed in other specialties.

Board spokesman Patrick Shaughnessy said tort reform has played a part, though general population growth also is a factor. The board had a backlog in processing applications, with delays of more than 100 days. But with added funding to hire more staff, the board has cut that down to about 40 days.

Critics refute cap's "success"

But critics say the picture is not so rosy and dispute the so-called successes of tort reform.

Not all doctors coming to the state are going to underserved areas or treating indigent populations, said N. Alex Winslow, executive director of Texas Watch, a consumer advocacy group that opposes tort reform.

Medical board disciplinary actions are on the rise, creating patient safety concerns, he added. Board statistics showed such actions rose 12% from 2003 to 2007.

"Just having more doctors is not a service. We need to have better doctors in underserved areas," Winslow said. He also said the reduction in lawsuit filings was because fewer plaintiff lawyers were willing to take medical liability cases.

Jay Harvey, immediate past president of the Texas Trial Lawyers Assn., said many carriers increased rates by as much as 150% before the referendum, a figure yet to be offset by the current decreases.

Harvey said more plaintiff lawyers are turning down complicated negligence cases because they can't afford the often high expense. The cap unfairly benefits doctors while discriminating against patients -- particularly those seriously injured -- who are left with little compensation, he said.

Lawmakers passed the reforms as a constitutional amendment to prevent state-based attacks. Fearing possible legal challenges, tort reform advocates filed an appeal in February asking the state Supreme Court to affirm the cap's constitutional validity. That case is expected to be heard this fall.

Opponents, meanwhile, have taken their case to a federal court seeking to have the cap declared unconstitutional. Among other claims, plaintiffs allege the Texas law violates patients' jury trial and due process rights under the federal constitution by setting an arbitrary recovery limit. This case is pending in U.S. District Court for the Eastern District of Texas.

Any supposed benefits to access to care from caps should not trump patient rights, said Robert S. Peck, president of the Center for Constitutional Litigation PC in Washington, D.C., which is leading the federal challenge.

Doctors promise to defend the cap.

"The stakes are extremely high for doctors and patients," said Jon Opelt, executive director of the Texas Alliance for Patient Access, which joined the state Supreme Court appeal, along with the Texas Medical Assn. and Texas Hospital Assn.

Dr. Saracino agreed. "Reform legislation has worked, and it is a step forward," he said. "We should not be taking a step back because there is a lot more work to be done" to improve patient care.

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Improved liability climate

Many Texas medical liability insurers have reduced premiums since 2003. Here's how the state's insurers have responded to the years of reform.

Estimated 2007 market shareRate change since Sept. 2003
Texas Medical Liability Trust48.9%-31.3%
Medical Protective16.8%-19.7%
American Physicians Insurance Co.14.7%-17.4%
Advocate, MD Insurance of the Southwest6.9%-29.5%
The Doctors Co.4.9%-30.7%
Preferred Professional Insurance Co.2.1%-5.9%
Everest National Insurance Co.1.3%0.0%
Texas Medical Liability Insurance Underwriting Assn.1.3%-16.7%
Medicus Insurance Co.0.7%0.0%
Medical Assurance Co.0.6%33.5%
Medical Liability Insurance Co. of America0.6%0.0%
Texas Medical Insurance Co.0.5%-31.3%
National Union Fire Insurance Co. of Pittsburgh0.5%0.0%
Anesthesiologists Professional Assurance Co.0.1%-30.6%
Physicians Insurance Co.0.0%-21.5%

Source: Texas Dept. of Insurance, April

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Access increased

Texas has seen an influx of specialists since tort reform was enacted in 2003. For example:

Obstetricians and gynecologists2,8303,0357%
Orthopedic surgeons1,7901,9529%

Source: Texas Medical Board

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