Statement Of Senator Patrick Leahy
The Medical Malpractice Insurance Antitrust Act of 2005
July 28, 2005

I am pleased to introduce the “Medical Malpractice Insurance Antitrust Act of 2005.”  In the ongoing debate about health care costs, this legislation is a targeted and responsible move toward fixing one significant part of the system that is broken – the skyrocketing insurance premiums for medical malpractice.

For too long, doctors and hospitals have endured dramatic increases in the cost of their malpractice insurance.  I doubt there is a single Senator who has not heard repeatedly from beleaguered physicians back home.  Rising insurance rates are reportedly forcing some doctors to abandon their practices. 

Some of my colleagues in the other body seem content to echo the refrains of the insurance industry and heap blame for the problem of rising insurance premiums rates on trial lawyers and the victims of medical malpractice themselves.  I have opposed arbitrary caps on damages because they will inflict additional harm on the most vulnerable victims of medical malpractice.

Many of us have questioned the insurance industry’s claim that lawsuits are causing the rise in premium costs since doctors in states that have imposed damages caps have not seen a reduction in their medical malpractice insurance premiums.

A newly released report provides shows that our questions were well-founded. This report provides real evidence rather than anecdotal stories routinely trotted out by the insurance industry advocates.  This study was prepared by a former State Insurance Commissioner and uses the insurance industry’s own numbers to debunk the myths being advanced by the insurance industry.

The study entitled, “Falling Claims and Rising Premiums in the Medical Malpractice Insurance Industry,” suggests that malpractice insurers have been overcharging, even gouging, physicians unconscionably.  I expect a number of Senators will be surprised to learn that the malpractice claims payments actually went down, in real terms, over the past five years.  In addition, even the insurers’ own projections of future losses are declining.  Despite these downward trends, year in and year out, these insurers are burdening doctors with increased premium costs and shifting the blame for their increases on to lawyers and victims.

In the past five years, premiums have more than doubled even though claims payments have been stable. In 2004, malpractice insurers’ total premiums were three times higher than their payouts. During the years 2000 to 2004, net premiums increased by 120 percent, while net claims payments increased by less than 6 percent.

I urge Senators to read this report. It is based entirely on data from annual statements filed under oath with state insurance departments by the nation’s 15 largest malpractice insurers. The statements contain each insurer’s estimate of how much it will pay out in malpractice claims, as well as data showing how much it actually paid out in claims and took in premiums. Claims and projected losses are down.  It is only premiums that are rising, not claims.

What this boils down to is an insurance industry problem, not a problem with the legal system.  No wonder that the state attorneys general of Connecticut and Missouri have reacted to the study by attacking industry practices and calling for an aggressive regulatory response.

As this study makes clear, high malpractice insurance premiums are not the result of malpractice lawsuit verdicts.  They are the result of investment decisions by the insurance companies and of business models geared toward ever-increasing profits.  I hope that this study once and for all shines light on the real culprit in rising malpractice insurance rates and informs the Senate with solid evidence of the best way to assist the good doctors who commit their professional lives to caring for others.  I ask unanimous consent that the Executive summary of the study be inserted into the Record.

To be sure, different States have different experiences with medical malpractice insurance, and insurance remains a largely State-regulated industry.  Each State should endeavor to develop its own solution to rising medical malpractice rates because each state has its own unique problems. Some States—such as my own, Vermont—while experiencing problems, do not face as great a crisis as others. 

But another fact of the insurance industry’s business model requires a federal legislative correction—its blanket exemption from federal anti-trust laws. Insurers have for years enjoyed a special benefit in our marketplace. The McCarran-Ferguson Act permits insurance companies to operate without being subject to most of the Federal antitrust laws, and our Nation's physicians and their patients are suffering from this special treatment. Using their exemption, insurers can collude to set rates, resulting in higher premiums than true competition would achieve – and because of this exemption, enforcement officials cannot investigate any such collusion. If Congress is serious about controlling rising premiums, we must revoke this blanket exemption created in the McCarran-Ferguson Act.

That is why today I introduce the “Medical Malpractice Insurance Antitrust Act of 2005.” I want to thank Senators Kennedy, Boxer, Corzine, Durbin, Feingold, Mikulski, Obama, Rockefeller, and Salazar for cosponsoring this essential legislation. Our bill modifies the McCarran-Ferguson Act for the most pernicious anti-trust offenses: price fixing, bid rigging, and market allocations.  I am hard-pressed to imagine that anyone could object to a prohibition on insurance carriers’ fixing prices or dividing territories for anticompetitive purposes. After all, the rest of our Nation’s industries manage either to abide by these laws or pay the consequences.   

Many State insurance commissioners police the industry well within the power they are accorded in their own laws, and some States have antitrust laws of their own that could cover some anticompetitive activities in the insurance industry. Our legislation would not affect regulation of insurance by State insurance commissioners and other State regulators.  There is no reason to continue a system in which the Federal enforcers are precluded from prosecuting the most harmful antitrust violations just because they are committed by insurance companies.

This legislation is a carefully tailored solution to one critical aspect of the problem of excessive medical malpractice insurance premiums.  I hope that quick action by the Judiciary Committee and then by the full Senate, will ensure that this real solution is adopted before more damage is done to the physicians of this country and to the patients that they serve.

Only professional baseball has enjoyed an anti-trust exemption comparable to that created for the insurance industry by the McCarran-Ferguson Act.  Senator Hatch and I have joined forces several times in recent years to scale back that exemption for baseball, and in the Curt Flood Act of 1998 we successfully eliminated the exemption as it applied to employment relations. I hope we can work together again to create more competition in the insurance industry, just as we did with baseball.

If Congress is serious about helping to control rising medical malpractice insurance premiums, then we must limit the insurance industry’s broad exemption to Federal antitrust law and promote real competition in the insurance marketplace.  

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