Fool Me Once: The Insurance Industry Looks to Tort Reform to Pad Profits

Who came out winners from a decade of tort reform, and of destroying the civil justice system? That would be the insurance industry.
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In the immortal words of the 43rd President of the United States, "fool me once, shame on you. Fool me ... you can't get fooled again."

Tort reform has made fools out of a lot of people for many years. First, it is touted as the answer for doctor's skyrocketing premiums, then for the exploding cost of health care. Yet time after time, the only group that ever really profits from it is the insurance industry.

In the early part of the decade, doctors clamored for tort reform in response to insurance companies jacking up their rates for malpractice insurance. Now, 46 states have passed some version of it. But ironically, malpractice premiums are lower in states without caps. Doctors did not benefit, and the patients who had their rights eliminated certainly did not benefit. So who came out winners from a decade of destroying the civil justice system?

That would be the insurance industry. Tort law changes made medical negligence cases so difficult to pursue that claims dropped precipitously. Between 2000 and 2006, the amount of money insurance companies paid out decreased by 15%. But that did not help the doctors because insurance companies never passed on those savings. In fact, the amount of money insurance companies took in from doctors increased by 120%.

To their credit, insurance industry execs and enemies of civil justice never denied they had pulled the wool over everyone's eyes. "Insurers never promised that tort reform would achieve specific premium savings," said the American Insurance Association in 2002. "We wouldn't tell you or anyone that the reason to pass tort reform would be to reduce insurance rates," said Sherman "Tiger" Joyce, head of the tort reform movement in 1999.

Now, times are good for the insurance industry. Insurance company CEOs make more money than CEOs in any other industry. Malpractice insurers themselves are enjoying the best operating margins for 20 years. In 2008, the average profit of the top ten malpractice insurers was higher than 99% of the Fortune 500. But now they call for tort law changes under the guise of reducing health care costs. Never mind that the costs associated with medical negligence are such a small fraction of health care costs that almost all academic and government researchers agree that limiting patients' legal rights would do nothing to fix health care.

They fooled everyone once before. Now 46 states have made it harder for injured people to seek recourse, and American families still shoulder exorbitant health care costs. All the facts and data say it doesn't work. There's still 98,000 people dead every year from medical errors. And the insurance industry is enjoying booming profits. Tort reform is nothing more than a bailout for an industry already awash in money. You can't get fooled again.

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