2015 HCP Scholarship – Winning Essay – Phalen

Question: “Do you think there should be a MICRA cap on all professional liability claims? Why or why not?”

Insurance claims come in all sizes. There are the claims people make about their cracked car windshield or about hail damage. Then, on a whole different scale, there are the insurance demands against hospitals or doctors who made mistakes and harmed patients. These can cost insurance companies anywhere from hundreds of thousands to millions of dollars. While the medical practitioners should indeed have to compensate patients for their errors in some way, the excessive monetary demands should be kept to a minimum in order to make medical malpractice insurance more affordable for the practitioners. This should be the case in other professional liability cases as well.

California passed the Medical Injury Compensation Reform Act (MICRA) which limits punitive damages to $250,000. This limits the amount of money a medical practitioner will have to pay as punishment for acting recklessly or with bad intent. The benefit of limiting this amount of money is that it lowers the cost of medical malpractice insurance which can be very expensive and can inhibit people from successfully starting medical practices.

The main benefit of placing a cap on punitive damage payouts lies with insurance companies because they do not have to pay as much money overall. They are not expected to dole out millions of dollars to patients. However, another benefit occurs for the medical practitioners. Since the insurance companies do not have to fear excessive demands, they can charge the practitioners less for medical malpractice insurance. This helps the system overall because it becomes possible for health providers to start their own offices and be able to afford the insurance necessary to maintain successful businesses even if they are faced with a malpractice claim. Along with the security health workers obtain by having professional liability insurance, some states and workplaces require certain levels of malpractice insurance. For example, Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin all require varying levels of insurance in order for a health professional to practice legally in the state. Since some workers would be required to obtain insurance, it is ideal that the cost of that insurance not place significant burdens on them. This would expand the network of qualified professionals in the medical community which is beneficial for all citizens who may require some form of medical attention or care.

Imagine that someone went through medical school and their residency and has been preparing to become a doctor for over ten years. Once they finally complete the required training and have invested the significant time and money required to do so, they want to start a clinic for family medicine. However, they live in Massachusetts which requires doctors to have an expensive minimum malpractice insurance policy. The new doctor can’t afford it because they are just starting off in their career. As a result, a completely qualified doctor can not work in family medicine on their own. Should a person be forced to change what they end up doing in life just because the cost of the required insurance is too high? Or should the cost be reduced in order to help emerging doctors who have the potential to grow into experts in their field?

Doctors who are just starting out should have equal opportunities to start their clinics as established doctors. Whether they are rich enough to afford an unbelievably expensive insurance plan should not play a significant role in their career decision.

Another benefit of placing a cap on all professional liability claims is the fact that it discourages excessive demands from people who tend to be excessively litigious. In America, many people are “sue-happy” and will go to court over seemingly small issues and demand excessive monetary compensation for those issues. This places harsh requirements on insurance companies and their clients who are forced to pay amounts of money that are not equitable to the degree of damage done. While higher monetary compensation demands may be appropriate in certain extreme cases, in most situations placing a cap on professional liability claims would do more good than harm.

Expanding a cap on liability claims from solely medical malpractice to other professional liability claims would help expand the benefits seen under the MICRA for medical personnel and insurance companies. The cap would help limit the amount of money insurance companies would be required to pay plaintiffs and therefore eliminate excessive demands for minor cases. In return, insurance companies could lower the cost of professional liability insurance, otherwise known as errors and omissions coverage. This would help professionals afford liability insurance so more would be able to have it.  This would also thereby protect them from paying excessive demands that could ruin their businesses.

However, one issue with the MICRA is the fact that the $250,000 cap has remained the same since the MICRA was first passed in 1975. At that time, $250,000 was a significant sum and usually enough to cover those punitive damages. However, over the past 40 years, inflation has occurred and $250,000 does not have the same value in 2015 as it did in 1975. Inflation is something that should be considered and addressed both for the MICRA in California and similar policies in other states. If inflation were taken into account, the cap would be more representative of a fair amount of money that would benefit all parties involved in the cases. If this were the case, the application of a cap to all professional liability cases would also be more appropriate.

Insurance is a highly charged subject in America because many people believe that insurance companies attempt to pay as little money as possible despite the fact that they charge their clients large sums of money for policies. By implementing a cap on professional liability claims not only would insurance companies have to pay less money for illegitimate and exaggerated claims, but they could reduce the cost of malpractice insurance. A MICRA cap that is periodically adjusted for inflation should be placed on all professional liability claims which would help professionals maintain and develop successful businesses and provide beneficial services for society.
Disclaimer: The author’s views are entirely his or her own and do not necessarily reflect the views of HCP National Insurance Services Inc.

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