Medical Malpractice Reform and Employer-Sponsored Health Insurance

Tort reform has been championed as a way to reduce health care costs for consumers. But this analysis of health insurance premiums several years after states have enacted tort reform reveals families and individuals have not realized any savings, thus raising the question of why consumers should trade off legal rights without economic gain.

Tort reform advocates have argued capping the amount of money medical malpractice victims can potentially collect for noneconomic damages will directly reduce malpractice insurance premiums, as well as change the way doctors practice medicine. Freed from the fear of large court judgments, providers will practice medicine less “defensively” and thus more efficiently. Health care cost reductions should then be passed on to consumers as lower insurance premiums, in effect, their “trade-off” for capping potential damages.

This analysis of health insurance premiums was based on data collected from private and government employers with more than 200 employees for the period from 1999 to 2004 and examined premiums three to five years after tort reform was enacted, allowing for the impact of reform to filter through the system. 

Key Findings:

  1. Caps of noneconomic damages did not translate into lower health insurance premiums for consumers. Various types of analyses did not alter this finding.
  2. A survey of empirical research does suggest tort reform has constrained the growth of malpractice premiums for providers but, as these authors note, these premiums are a very small component of health care costs and do not have much impact on overall costs.
  3. From research by others, it is less clear whether doctors change the way they practice medicine after tort reform, although there is evidence of some cost reductions in cardiac and obstetric care.

Tort reform has not led to health care cost savings for consumers. Given the strength of this finding, the authors assert legislators need to reexamine whether tort reform offers consumers any benefits.