Originally published February 23 2006
Nonprofit sheds light on the dirty practices of the medical insurance industry
by Mike Adams, the Health Ranger, NaturalNews Editor
A study by the nonprofit Foundation for Taxpayer and Consumer Rights has uncovered the widespread practice in the insurance industry of exaggerating estimates concerning medical malpractice payouts, both to apply pressure for lawsuit regulation and justify increases in doctor premiums.
In documents filed with state regulators and in statements to public officials, medical malpractice insurance companies consistently inflated the amount they estimated they would pay out in claims, according to a study by the nonprofit Foundation for Taxpayer and Consumer Rights.
The report maintains that insurers then used the overstated figures to justify increases in doctors' premiums and pressure legislators to enact lawsuit restrictions.
During that period, insurers reported $39 billion in losses to regulators, but actually paid out only $27 billion in claims, according to the report.
FTCR called for an investigation of industry accounting practices that it said enable insurance companies to misrepresent their financial condition and charge potentially billions of dollars in excessive premiums.
The study suggests that the alleged inflation of insurers' losses, as reported in the annual statements they submit to regulators, is greater during periodic economic downturns when insurers' investment income falls.
"By inflating their estimated 'losses' as much as 66 percent, medical malpractice insurance companies have misled regulators, lawmakers and the public and overcharged physicians and other health care providers," said FTCR's Harvey Rosenfield.
"Because all insurance companies use the same flawed accounting practices, it is likely that the insurance industry is responsible for several billion dollars in premium overcharges over the last few years, a period during which premiums have soared.
The FTCR compares the dollar amount medical malpractice insurers initially reported they would pay out on policies in effect between 1986 and 1994 with insurers' reports made ten years later of what they actually paid out in claims under policies in effect in each of those years.
FTCR said it examined incurred loss data reported by insurance companies to state insurance regulators and published in A.M. Best's Aggregates and Averages.
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