Selling medical malpractice insurance has become a very profitable business in West Virginia, according to a new report from the state Insurance Commission.
Last year, med-mal insurance companies made more than twice as much as they spent in West Virginia, the report said. That's a better profit margin than the national average for medical malpractice insurers.
Those profits have allowed the state's largest med-mal insurer, West Virginia Mutual, to pay its chief executive officer about $300,000 a year, plus a performance bonus.
Profits are going up for med-mal insurance companies because the number of people filing lawsuits has decreased by almost half in the last four years, the report says.
Earlier this decade, med-mal insurers hiked their premiums for doctors because the companies were losing money, according to the report.
Now, the stock market is up and lawsuit costs are down, but the premiums remain relatively high. That means profits for med-mal insurance companies.
Starting in 2001, state lawmakers passed a number of changes to make it harder for patients to sue doctors for malpractice. They put caps on damages and required lawyers to receive a judge's certification before they could actually sue.
In 2001, patients brought 379 lawsuits in state courts. By 2005, that number had fallen to 193 cases, according to the report.
Because of these legal changes, doctors are beginning to see their premiums go down, said Bill Kenny, deputy director of the state Insurance Commission. Kenny presented his report Monday to a special committee of the Legislature.
"We're finally seeing some stability and profitability in the market," Kenny said.
For example, West Virginia Mutual has reduced rates by an average of 5 percent, and plans another 15 percent cut in January.
Kenny said that rates should not be slashed too quickly. The same insurance companies that are making money today suffered big losses between 2000 and 2002, he said.
The Legislature set up the mutual when it passed its changes in medical malpractice law. The mutual received $30 million in start-up funds from taxpayers, which it is paying off over 30 years at a 1.5 percent interest rate.
West Virginia Mutual CEO David Radertold lawmakers that the non-profit company now insures almost two-thirds of the state's doctors and has $50 million in reserves.
Delegate Cindy Frich, R-Monongalia, asked Rader about his salary and the compensation of the rnutual's board of directors.
Rader said the board members are paid about $20,000 a year, while he makes about $300,000 a year, plus a bonus based on the company's performance.
Dr. Richard Lindsay, a physician and lawyer who specializes in malpractice cases, says the Legislature went too far in changing the medical malpractice laws.
"People aren't filing claims. A lot of attorneys aren't taking med mal cases anymore, because they can't afford to," Lindsay said. "That doesn't mean there is less malpractice in the state."