by Kendra Mayer

Eureka! According to tort reform proponents from medical organizations to both candidates for Texas Governor, California has found it. As a medical liability crisis builds across the country, reformers look to the Golden State for answers.

From 1965 to 1975, the number of malpractice claims in California increased by 200 percent and dollar amounts awarded in judgments increased 1,000 percent, according to The Doctor’s Company. Amidst a medical liability crisis, California enacted the Medical Injury Compensation Reform Act, which legislators hoped would protect access to health care for Californians by bringing stability to a market that had seen professional liability insurance premiums shoot up as much as 380 percent.

Since its enactment, MICRA has reduced the rate at which liability premiums in California increase to below the national average. From 1976 to 2000, liability rates in California have increased 167 percent, while rates in the rest of the country have gone up 505 percent, according to the National Association of Insurance Commissioners. For example, an obstetrician in Florida pays around $166,368, while the premium for a California obstetrician is $57,473. MICRA also reduced the number of frivolous lawsuits brought to court and increased the number of cases settled out of court, according to the Health Care Liability Alliance, a group of medical organizations dedicated to resolving problems within the nation’s health care system.

MICRA put six major provisions in place, attempting to change the unstable malpractice insurance environment, according to Californians Allied for Patient Protection. According to CAPP, MICRA has continually influenced and protected access to health care for Californians for nearly three decades.

MICRA’s centerpiece is a $250,000 cap on non-economic damages, like pain and suffering and loss of consortium. Awards for economic damages such as medical and hospital bills, lost wages, and future medical expenses are not limited by the statute. According to The South Florida Business Journal, the cap allows for a more competitive insurance market, keeping insurance premiums in California three times lower than those in Florida, one of 12 states including Texas the AMA has listed as liability crisis zones.

Another major provision of MICRA is the establishment of limits on attorney contingency fees. Fee limits operate on a sliding scale peaking at an attorney fee of 15 percent on any amount exceeding $600,000. Overall, this means $110,000 more for the injured party instead of their lawyers involved in a settlement of $1 million.

In California courts, a defendant in a medical liability action may introduce evidence of collateral source payments as they relate to damages sought by the claimant. This allows the defendants to argue that the damages be limited to what the plaintiff actually paid out if for example, the plaintiff is covered by a health insurance policy. The collateral source rule reform enacted with MICRA reduces the severity of claims, helping to keep down the cost of health care for everyone.

Another reform of MICRA is the periodic payment of damages, or the practice of  paying certain damages over a period of time, rather than in a lump sum. The plaintiff still recovers past and present damages when the settlement is reached and payments for calculated future damages are made on a schedule. However, should the plaintiff die, the award to the plaintiff is discontinued.

MICRA demands a claimant give a 90-day notice of intention to bring suit, giving insurance companies more time and a greater chance to research a case and possibly settle out of court. According to The Doctors Company, a physician-owned liability carrier, MICRA has helped to reduce the average settlement time in a California court to two years, six months shorter than the average in the rest of the country.

MICRA also sets a statute of limitations for filing medical liability to within one year of the discovery of an injury, except in cases involving minors. Other reforms include requirements on the reporting and record keeping of the resolution of medical malpractice cases and regulation of the industry by the state’s commissioner of insurance.

MICRA has transformed the state of medical liability in California. California once had malpractice insurance rates among the highest in the United States, but with the enactment of MICRA, the state has enjoyed a stable professional liability market for nearly three decades. As states like Nevada, West Virginia, Pennsylvania, Mississippi and Texas find themselves in their own medical liability crises, one thing is certain, many are looking to California and following suit.