Most of Carson City's physicians will lose their medical malpractice insurance Feb. 1, following a decision by Farmers Insurance Group to discontinue that type of insurance. The physicians are scrambling to find more insurance, but Dr. Kathy Amrhein, pediatrician and doctor of osteopathic medicine with Carson Medical Group, said the options are limited.
"We don't have much choice. About four companies offer malpractice insurance in Nevada," she said. "Two of those aren't writing new policies, and one of the remaining companies doesn't offer coverage to most specialties."
She said her rates will be doubling from $5,000 to $9,900 annually. She'll have to work harder to make the same amount of money, but the price goes even higher for older physicians who may retire in the next five years.
Because they're purchasing new coverage for a relatively short period of time, those rates are higher.
"Some of the doctors are thinking about retiring because of their insurance rates," she said.
A decrease in the number of physicians could mean longer waits for appointments, said Leonard Hamer, executive director of Physicians Managed Group.
The decision affects physicians in at least 18 Western states, including about 80 physicians in Carson City and the Carson Valley. The local doctors have been with Farmers for six years, and it's a problem with no easy solution, he said.
"St. Paul's Co. insured about 60 percent of the doctors in Nevada before announcing that they were going out of business nationwide, 18 months ago," Hamer said. "That created a crisis and the problem hasn't been solved.
"It's a tough situation," he said. "The Legislature worked hard on this problem, but the problem still exists and it's not going away."
Medical malpractice insurance operates much like other types of insurance, with insurers collecting premiums from policyholders in exchange for an agreement to defend and pay future claims within the limits set by the policy.
Insurers invest the premiums, using the income to reduce the amount of premium that would have been otherwise required.
Farmers Insurance in Los Angeles did not return phone calls, but according to a June report by the General Accounting Office, multiple factors have contributed to increases in malpractice rates.
n Medical malpractice claims have increased rapidly in some states.
n From 1998 to 2001, a fall in interest rates on bonds meant 80 percent of these insurers saw decreases in their investment income. As a result, insurance premiums had to cover a larger share of insurers' costs.
n During the 1990s insurers competed vigorously for medical malpractice business and several factors, including high investment returns, permitted them to offer lower prices. In hindsight, those returns did not cover the losses in the business.
n Starting in 2001, reinsurance rates for medical malpractice insurers increased more rapidly than in the past, raising insurers' overall costs, the report said.