Premium increase causes pain for patients, providers

Annual changes in premiums, 2015-2024

Using nationwide, annual premium data collected by the MLM, Exhibit 1 summarizes the proportion of premiums that remained unchanged, increased, or decreased from the previous year over the 2015 to 2024 period. The overall picture is a clear upward trend in medical liability premiums since 2019.

Exhibit 1 shows that liability premiums remained relatively stable from 2015 through 2018, continuing the trends of the soft market which followed the hard market of the early 2000s. In 2018, 80.8 percent of premiums showed no change from the previous year, compared to 69.1 percent in 2015. That proportion, however, has declined significantly in recent years. By 2024, only 45.5 percent of premiums experienced zero change from the previous year.

More importantly, the proportion of premiums that went up has risen significantly from 2019 to 2024, reaching levels not seen since 2005. From 2015 to 2018, the share of premiums experiencing any increase hovered around 15 percent. The trend began to accelerate in 2019, with the share of premiums that increased nearly doubling from 13.7 percent in 2018 to 26.5 percent. The upward trajectory continued in 2020, where this share grew to 31.1 percent. Despite a small dip in 2021, this trend gained momentum again, culminating in 2024, when almost half (49.8 percent) of the reported premiums rose from the previous year.

When comparing the trend between the six Patient Compensation Fund (PCF) states and non-PCF states (data not shown), a larger proportion of premiums in PCF states experienced an increase compared to non-PCF states. Specifically, more than three-quarters (78.6 percent) of premiums in PCF states experienced an increase, compared to 46.6 percent of premiums in non-PCF states.

Among the premium increases in PCF states, nearly two-thirds (66.3 percent) were due to a rise in base premium (and, in some cases, a combination of base premium and surcharge), while the remaining proportion was solely due to a rise in surcharge.

The share of premiums which experienced a decline has also fallen over time. In 2015, 13.6 percent of premiums declined. This share has dropped significantly and in 2024, only 4.7 percent of premiums decreased from the previous year.

In summary, the average premium increase was 2.5 percent from 2023 to 2024, up from 1.9 percent from 2020 to 2021 (data not shown).

Exhibit 2 provides a closer look at the premium increases in states that had at least one premium that increased by 10 percent or more from 2023 to 2024. There are 16 states that meet this criterion, up from 11 states in 2023, 15 states in 2022, and 12 states in 2021. These states are ranked by the proportion of premiums that reflected an increase of 10 percent or larger. Hawaii and Pennsylvania are ranked first and second, respectively, with approximately half of their premiums experiencing a 10 percent or larger increase from 2023 to 2024.

Among these states, Pennsylvania, Oklahoma, Nebraska, Missouri, Illinois, and New Jersey each had at least one premium with an increase of at least 10 percent from 2022 to 2023 as well. This indicates that these states underwent a notable surge in premium across two consecutive years. Furthermore, an analysis of prior years’ premium data reveals that Missouri and Illinois have suffered considerable premium spikes since 2020.

For a more comprehensive look at these states, this exhibit also highlights the size of the largest increase (column 2) and the proportion of premiums that experience a rise (column 3). The results provide some notable insights. For example, all of the reported premiums in Kentucky faced an uptick in 2024, with the largest increase reaching 30.6 percent. The story is similar in Pennsylvania, where 94.1 percent of reported premiums rose in 2024, with the largest increase being 22.5 percent.

There are 22 states where at least 50 percent of the reported premiums saw a jump in 2024, 13 of which are listed in Exhibit 2. This is a significant jump from 13 states in 2023 and 15 states in 2022. This also represents a sharp rise from 2021, when only six states had the same trend. Overall, 46 states reported at least one premium increase in 2024, up from 36 states in 2023, 38 states in 2022, and 32 states in 2021.

Geographical variations in premium levels

While previous exhibits have focused on changes in premiums, Exhibit 3 examines how reported premiums vary across the three specialties and seven areas over the 2015 to 2024 period. For a given area, the reported premiums are for the same insurer over time across each of the three specialties. However, insurers can and do differ across states, as no insurer reported in the MLM provides coverage nationwide. Furthermore, because each state’s premiums in Exhibit 3 only represent one insurer, they should not be generalized to reflect the experience of each state as a whole.

This exhibit reveals significant variations in premiums across both specialties and geographic areas. In general, the premiums for obstetricians/gynecologists and general surgery are significantly higher than for internal medicine. For example, the premiums for obstetricians/gynecologists and general surgeons are $243,988 in Florida, while the reported rate for internal medicine physicians is $59,736. A similar pattern is observed in Connecticut, though the premiums are lower relative to those reported in Florida, ranging from $21,770 for internal medicine specialists to $154,591 for obstetricians/gynecologists. This is in line with previous findings on differences in liability risks across specialties, which show that general surgeons and obstetricians/gynecologists are the physicians most likely to be sued (Guardado, 2023).

Exhibit 3 also demonstrates that the reported premiums are significantly lower in California than in other states across all three specialties. This is likely driven by the fact that California is the only state listed in Exhibit 3 that has a law enacting caps on noneconomic damages. Previous research has shown that such caps are associated with reductions in premiums (Thorpe, 2004; Viscusi & Born, 2005; Kilgore et al., 2006). In line with the recent increase in the cap limit, overall premiums in California saw a notable 11.6 percent jump from 2022 to 2023, after remaining unchanged from 2021 to 2022 (data not shown).

Conclusion

This PRP provides an overview of the latest trends in medical liability premiums from 2015 to 2024. For the sixth year in a row, medical liability premiums have experienced an upward trajectory not seen since the last liability crisis in the early 2000s. For context, in 2003 and 2004, 77.4 percent and 82.1 percent of premiums saw a rise from the previous year, respectively. Some general surgeons in Miami-Dade County, Florida, faced manual premiums as high as $277,241 in 2004 (Guardado, 2007).

This crisis was followed by a stable period beginning in 2007, during which the share of premiums that experienced an uptick declined significantly. Although fewer premiums experienced declines over time as reductions became less common, the trend remained relatively stable until 2018.

The upward trajectory of premiums began in 2019, when the share of premiums experiencing a year-over-year increase nearly doubled compared to 2018, reaching 26.5 percent. In 2020 and 2021, this proportion remained steady at approximately 30 percent, before rising to around 37 percent in 2022 and 2023. By 2024, however, the proportion of premiums experiencing an increase saw a significant jump to 49.8 percent, the highest level observed since 2005.

Some actuaries believe the MPL industry has not yet entered a hard market (Burns & Miller, 2024). However, there are signs that such conditions may become a reality in the near future. First, in 2024, 16 states saw at least one premium increase of 10 percent or more, up from 11 states in 2023, 15 states in 2022, and 12 states in 2021. Second, premium increases became widespread with 46 states reporting at least one premium hike in 2024, compared to 36 states in 2023, 38 states in 2022, and 32 states in 2021. Lastly, the number of states where at least 50 percent of the reported premiums saw a jump increased from 13 states in 2023 to 22 states in 2024. Although a nationwide hard market has not yet emerged, certain states are already experiencing hard market conditions. For example, in Illinois, 90.7 percent, 81.5 percent, and 88.2 percent of reported premiums respectively saw an increase in the last three years. Furthermore, Illinois and Missouri have suffered notable premium spikes since 2020.

This PRP also highlights a clear geographical variation in medical liability premiums, as insurers determine their rates on the aggregate claims experience in a particular area, which can be influenced by state tort reforms such as caps on non-economic damages. Previous research shows clear evidence that caps on non-economic damages are associated with reductions in claims frequency and claim payments, which subsequently affect the premiums insurers charge (Mello & Kachalia, 2016).

By multiple measures, this year’s edition of MLM reveals a clear and widespread rise in average premiums over the last few years, a trend not observed since the last hard market in the early 2000s. Whether this upward trajectory will persist in the near future remains to be seen. However, if the trend continues, it could negatively impact patients’ access to care due to a reduction in physician supply (American Medical Association, 2024).

 

References

American Medical Association. (2024). Medical Liability Reform Now!. https://www.ama- assn.org/system/files/mlr-now.pdf

Burns B., & Miller, K. (2024). MPL Pricing, You Ask? Sorry, You’ll Have To Be More Specific. Medical Professional Liability In 2024. Medical Liability Monitor, Annual Rate Survey Issue, Vol. 47 (10).

Guardado J. (2007). Professional Liability Insurance Rates and Distributions of Rate Changes, 2003- 2007. American Medical Association, Policy Research Perspectives, No. 2007-2.

Guardado J. (2023). Medical Liability Claim Frequency Among U.S. Physicians. American Medical Association, Policy Research Perspectives, No. 2023-3.

Kilgore, M. L., Morrisey, M. A., & Nelson, L. J. (2006). Tort law and medical malpractice insurance premiums. INQUIRY: The Journal of Health Care Organization, Provision, and Financing, 43(3), 255-270.

Mello, M. M., & Kachalia, A. (2016). Medical malpractice: evidence on reform alternatives and claims involving elderly patients. A Report to the Medicare Payment Advisory Commission,(MEDPAC 2016).

Thorpe, K. E. (2004). The Medical Malpractice ‘Crisis’: Recent Trends And The Impact Of State Tort Reforms: Do recent events constitute a crisis or merely the workings of the insurance cycle?. Health Affairs, 23(Suppl1), W4-20.

Viscusi, W. K., & Born, P. H. (2005). Damages caps, insurability, and the performance of medical malpractice insurance. Journal of Risk and Insurance, 72(1), 23-43.

AMA Economic and Health Policy Research, February 2025