With the recent passing of Assembly Bill 35 (AB35) to modify California’s Medical Injury Compensation Reform Act (MICRA), the Golden State’s physicians and surgeons will experience the first cap adjustments for non-economic medical malpractice damages since 1975. These unprecedented cap increases – and the inevitable rise in medical malpractice insurance rates – combine to make it even more challenging to keep a surgical private practice adequately and affordably covered. This is especially true for private practice surgeons in specialties that historically have been more frequently sued – OB/GYN specialists, orthopedic surgeons, neurosurgeons, plastic surgeons, general surgeons, and bariatric surgeons. The good news is that there are proactive steps that California surgeons can take to manage MICRA-driven malpractice insurance rate increases over time as they grow their practice.
The new MICRA: Higher caps. Gradual increases.
As of January 1, 2023, AB35 raises the current limit of $250,000 on non-economic damages for non-death cases to $350,000. Incremental increases over the next 10 years will raise the cap to $750,000, followed by a 2% annual adjustment for inflation in subsequent years.
The limit for malpractice cases involving wrongful deaths will increase to $500,000 and will rise incrementally to $1 million over the next 10 years. The subsequent 2% annual adjustment for inflation will also apply.
Additional mandates in AB35 now allow patients to sue and collect compensation from three separate sources – doctors, hospitals, and “separate, unaffiliated” providers such as specialty surgeons in private practice.
While MICRA’s modifications are gradual, California’s non-economic cap would have skyrocketed if not for the actions of state healthcare community groups, such as the Cooperative of American Physicians, to keep the Fairness for Injured Patients Act (FIPA) off of the ballot in November 2022. The passage of FIPA would have essentially abolished the protections of MICRA’s consistent non-economic cap in favor of retroactive inflation adjustments from the time the cap was set in 1975. Had FIPA prevailed, the cap would have risen from $250,000 to $1.3 million, according to a May 5, 2022, article in the L.A. Times.
Expect higher rates over time.
As noted earlier, specialty surgeons perform high-risk procedures and thus have shown to be more vulnerable to malpractice litigation. Without adequate liability coverage, a malpractice ruling against a surgeon in private practice has the potential for devastating personal and business-related financial loss. Moreover, there is the threat of losing the practice altogether.
Clearly, the changes to MICRA will bring about higher costs of medical malpractice coverage in California, although probably not immediately. For example, The Doctors Company, the nation’s largest physician-owned medical malpractice insurers, reports that the company will not likely increase their base rates in California in 2023. Overall, rate increases are expected to be gradual as the cap goes up incrementally over the next decade.
However, the reality is that California surgeons should be prepared to budget additional practice revenue to ensure they have the right coverage for their personal liability and business.
On average, medical malpractice premiums make up approximately 5% of the cost of doing business at specialty practices, such as OB/GYN, neurosurgery, and thoracic surgery, according to sources in a February 4, 2022, online article in the Bulletin of the American College of Surgeons. Also, the Medscape Medical Malpractice Premium Report 2019 indicated that specialty surgeons usually pay higher rates than other physicians. For example, OB/GYN specialists reported paying annual premiums of $46,000 versus $10,000 for a family medicine physician. In 2021, the approximate annual rates for OB/GYN specialists in Los Angeles County fell between $40,000 to $49,000, according to findings in the 2021 Medical Liability Monitor survey.
Be proactive: What California surgeons can do now.
If you are a California surgeon in private practice, review your practice business plan now to determine how MICRA cap increases will affect overhead in 2023, and make projections for handling incremental rate increases over the next decade. Next, review your current malpractice insurance plan to determine what needs to change in order to reduce malpractice liability for your practice now and in the future. Here are three other practical ways that California surgeons can continue to protect the practice from malpractice litigation loss:
Secure robust malpractice insurance coverage from a reputable carrier, such as The Doctors Company, Medical Protective, or another strong carrier with an AM Best “A” Rating.
Work with an independent broker, such as MEDPLI Insurance Services, to have the advantage of getting multiple carrier quotes through a single point of contact.
In the big picture, even with cap increases, MICRA still preserves its original goal to give California surgeons and patients alike a consistent and stable platform for malpractice litigation and compensation. Also, although California’s malpractice insurance rates will go up, it will be a gradual process rather than an immediate, drastic increase if FIPA had passed. Looking to the future on those positive notes, California surgeons can take action now to successfully adapt to MICRA as it evolves and changes.
Have questions about California medical malpractice insurance? We can help! Check out our California resource page for doctors or call us at 1-800-969-1339.