New York Imposes Short-term Moratorium on Medical Malpractice Rate Hikes

New York Gov. David Paterson recently signed into law a bill that freezes medical malpractice rates in the state until July 1, 2009, giving state officials and policy-makers more time to reach an agreement on how to reduce those rates.

A.B. 40003 was passed as part of a larger budget bill. It was a response to the New York State Assembly's failure to enact reforms to address the escalating cost of medical malpractice insurance that has plagued the state for more than a decade, said Vito Grasso, C.A.E., EVP of the New York AFP.

The governor acted to avert possible increases in medical malpractice rates that could have topped 30 percent this year. His signature on the bill forestalls any increases for the next several months, giving the state legislature more time to work on a long-term solution to rising rates. The legislation represents a "Band-Aid" approach to the problem, said Grasso, but it averts double-digit increases in malpractice rates for the time being. However, he added, it falls far short of the broad reforms that seemed possible earlier this year.

Although former New York Gov. Eliot Spitzer vowed to undertake a comprehensive review of the state's medical malpractice issues, he resigned earlier this year. As a result, support for major reforms waned, leading to a temporary fix, Grasso said in an interview with AAFP News Now. "Clearly, we are not going to get reform this year," he noted.

Nevertheless, Grasso said he expects the legislature and the governor will address medical malpractice reform during the 2009 legislative session, which begins in January. Some lawmakers have called for rate increases on other insurance products, such as homeowners and property insurance, to avert increases in medical malpractice rates.

In recent years, the insurance industry, stung by an ailing economy and the decline in nonpremium income, has increased premiums in New York to recoup lost revenues. At the same time, several carriers have pulled out of New York's medical liability insurance market, leaving the state in the hands of a few carriers who are able to determine the price, Grasso said.

The current medical liability system is in need of a major overhaul, said Grasso, citing various potential reforms that have been mentioned in the state. These reforms include caps on medical liability rewards and specialized medical courts that would rely on medical and technical experts and the discretion of judges, rather than juries, to decide cases. Grasso is not optimistic about the chances of these reforms becoming law.

"I don't think we will ever have tort reform as long as the perception exists that there is no difference between property liability cases and medical liability cases," he said.