Medical Malpractice Insurance Reform: “Enterprise Insurance” and Some Alternatives

Medical malpractice has been a white-hot topic in state legislatures during three periods in recent history: the mid-1970s, the mid-1980s, and again in the early 2000s. Each time, the precipitating cause was the same: dramatic increases in medical liability insurance premiums, particularly in high-risk specialties and locations. For that reason alone, medical liability insurance deserves careful attention in any discussion of medical malpractice reform. This chapter has three goals: to explain the pricing cycle that has driven these increases in medical liability insurance premiums, to evaluate the relative merits of potential public policy goals for medical liability insurance reform, and to consider ways to achieve those goals. As the title of this chapter suggests, I am most interested in promoting a reform that I call “enterprise insurance,” but the discussion of policy goals will provide a set of conceptual tools that are useful for evaluating other medical liability insurance reforms. Thus, this chapter has something to offer beyond an argument for enterprise insurance. I begin with a brief explanation of the medical liability insurance pricing cycle, focusing on aspects of medical liability that make the cycle so volatile. The main lesson here is that volatility in the medical liability insurance market results from the interaction between the cyclical nature of the insurance business generally and the comparatively high and concentrated nature of the uncertainties involved in predicting future medical liability losses in particular.