2004 PIAA MEMBERSHIP 41 PHYSICIAN(MD/DO) INSURERS 2 DENTAL/OMS INSURERS 3 HOSPITAL INSURERS 1 PODIATRIST INSURER 1 CHIROPRACTIC INSURER 9 INT’L PHYSICIAN INSURERS 57 TOTAL PRIMARY INS CO. MEMBERS 22 AFFILIATE MEMBERS

USA PIAA COMPANIES INSURE: 12/02 12/03 %  Physicians287,569310, Dentists 24,139 31, Oral Surgeons 3,665 6, Podiatrists 14,000 15, Chiropractors 33,308 34, Hospitals 1,163 1,

INTERNATIONAL PIAA COMPANIES INDEMNIFY: Physicians346,925 Dentists 24,959 Hospitals 139

PIAA DATA SHARING PROJECT

Average and Median Claim Payment Values Actual Dollar Value

2003 $ Values Average and Median Claim Payment Values

Average Expense Payment Values Actual Dollar Values

Average Expense Payment Values 2003 $ Values

Average Payments Indemnity and Expenses

% of Paid Claims by Payment Threshold

Claim Payments =>$1 Million Year % of Paid Claims Source: PIAA Data Sharing Project %

Outcome of Malpractice Cases Closed in 2003 Source: PIAA Data Sharing Project % 69.7% 5.1% 0.8%

PAYMENT VALUES – 2003 As of May 2004 Mean Indemnity Payment$328,757 Mean Settlement$ 322,544 Mean Verdict$ 430,601

PAYMENT VALUES – 2003 As of May 2004 Mean Indemnity Payment$328,757 Mean Expense Payment$ 29,683 Won at Trial$ 87,720 Lost at Trial$123,543 Settled$ 45,716 Dropped/Dismissed$ 17,408

TORT REFORM

Health Care Liability Reform $250,000 cap on non-economic damages Collateral source rule changes Periodic payment of future damages 1/3 year statute of limitations/repose Joint and several liability Contingency fee limits

Savings from MICRA Reforms California vs. U.S. Premiums Source: NAIC Profitability By Line By State $ Billions Other U.S % CA + 182%

Data Source: Medical Liability Monitor 2003 Premium Survey Data for Selected Specialties $1 million/3 million limits Los Angeles rates -CAP-MPT Chicago rates -Illinois State Medical Ins. Services, Inc. Denver rates -COPIC Insurance Company Miami rates -First Professionals Insurance Company California Premiums Low w/ Tort Reform:

HCLA/MICRANevadaMississippiOhio $250,000 Cap on Non-economic Damages (per occurrence) Non-economic Damages Capped at $350,000 per plaintiff and per defendant. This does not apply to “gross malpractice” or if the court finds exceptional circumstances. No cap on Non- economic damages if judge determines that punitive damages MAY apply. No cap for disfigurement. Otherwise $500,000 to $750,000 to $1m. {2004 legislation capped non- economic damages at $500,000.} Cap of $350,000 per plaintiff or $500,000 per occurrence (provided that 3 times economic losses exceeds $250,000.) Cap of $500,000 per plaintiff or $1,000,000 per occurrence if there is permanent and substantial physical deformity, loss of use of a limb, loss of a bodily organ system or permanent physical functional injury. Collateral Source Introduction at trial Mandatory collateral source offsets (excluding amounts for which there is a right of subrogation, if notice is served before settlement or entry of judgment). None Collateral Source Introduction at trial, except if the source has a right of subrogation.

HCLA/MICRANevadaMississippiOhio Periodic payment of future damages over $50,000 - Mandatory Set by court at the request of claimant. NonePeriodic payment of future damages over $50,000 - Discretionary Statute of limitations and statute of repose. 3 years from the date of injury and 1 year from the date of discovery. Exception for minors, the longer of 3 years or age eight. Prior to October 1, 2002, 4 years from date of injury and 2 years from date of discovery. After October 1, 2002, 3 years from date of injury and 2 years from date of discovery. [EXCEPTION for minors] For claims “accruing” on or prior to June 30, 1998, 2 years from discovery. For claims accruing after June 30, 1998, 2 years from discovery and 7 years from occurrence. [EXCEPTIONS for minors and foreign objects] 1 year statute of limitations (exceptions) and 4 year statute of repose (exceptions)

HCLA/MICRANevadaMississippiOhio Several liability (only) for non- economic damages Several liability (only) for non- economic damages. Several liability (only) for economic and non-economic damages. Prior Law: Several liability (only) for non-economic damages Contingency fee limits NONE Arbitration – Allowing health care providers and their patients to contract for the arbitration of disputes. NONE Non-binding, non- admissible arbitration allowed. Contractual binding arbitration between the provider and patient prior to care permitted.

HCLA/MICRANevadaMississippiOhio Other: Volunteer immunity Limits of $50,000 on all civil damages for governmental entities. Requires affidavit by a medical expert supporting the allegations. Mandatory settlement conferences. Other: Volunteer immunity Forum shopping restrictions. Requirement to file written notice of intention to begin action (60 Days). Requirement that attorney certify that 1) he has consulted with an expert (i.d. is not required) in the standard of care or negligence; or, 2) the attorney didn’t have time to comply with #1; or, 3) Three different experts refused to provide such consultation. Other: Data Collection provisions. Volunteer provider immunity Pretrial hearing to establish good faith of a claim Creates the Ohio Medical Malpractice Commission Superintendent of Insurance shall study the feasibility of a PCF.

Tort Reforms Have Passed In The US House of Representatives Nine Times Common Sense Product Liability and Legal Reform Act - Balanced Budget Act of Health Care Coverage Availability and Affordability Act Balanced Budget Act of District of Columbia Appropriations Bill

Tort Reforms Have Passed In The US House of Representatives Nine Times, Cont’d Patient Protection Act HEALTH Act – HR 4600 (217, 203) HEALTH Act – HR 5 (229, 196, 1) HEALTH Act – HR 4280 (229, 197)

THE HEALTH ACT HR 4600, HR 5, HR 4280 $250k CAP ON NON-ECON DAMAGES DOES NOT PRE-EMPT STATE CAPS COLLATERAL SOURCE RULE – EVID. CONTINGENCY FEE LIMITATIONS 1/3 STATUTE OF LIMITATIONS PERIODIC PAYMENTS JOINT AND SEVERAL LIABILITY

Congressional Budget Office Scoring of HR 5 March 10, 2003 $18.1 Billion Savings 2004 – 2012 $8.5 Billion Savings to the States “…premiums for medical malpractice insurance ultimately would be an average of 25 percent to 30 percent below what they would be under current law.”

USDHHS Addressing the New Health Care Crisis: Reforming the Medical Litigation System to Improve the Quality of Care March 3, 2003 “Over the last two years, states with limits of $250,000 or $350,000 on non-economic damages have seen average…increases of 18%, but states without…have seen average increases of 45%.”

JOINT ECONOMIC COMMITTEE U.S. CONGRESS May 6, 2003 Study found tort system fails to achieve its goals to compensate the injured and deter negligence. According to JEC, tort reforms would reduce overall spending on healthcare, saving between $67 and $106 BILLION over ten years.

US GENERAL ACCOUNTING OFFICE June, 2003 – Multiple Factors Have Contributed to Increased Premium Rates Increased Losses are Primary Driver Decreased Investment Income Competition Drove Rates Down Increased Cost of Reinsurance

US GENERAL ACCOUNTING OFFICE Aug, 2003 – Implications of Rising Premiums on Access to Health Care Studied FL, PA, WV, MS, NV Increased Losses Primary Driver Only Localized Access Problems Rates Grew Slower in States With Tort Reform

Polls Conducted by HCLA Q1. Do you think the number of malpractice suits against health care providers is higher than justified, about right, or lower than is justified? 3/044/029/0012/992/95 Higher than is justified 55%42%49%42%43% About right 24%30%25%30%18% Lower than is justified 16%13%22%13%8% Don’t know/Refused 5%15%4%15%30%

Polls Conducted by HCLA Q2. Would you favor or oppose a law to limit the percentage that a personal injury trial lawyer can receive as a fee from any settlement or award for his or her client? 3/044/029/0012/993/95 Total Favor 73%76%79%80%76% Total Oppose 25%23%19%15%17% Strongly Favor 54%55%61%59%58% Somewhat Favor 19%20%18%20%18% Somewhat Oppose 12%10%9%7%8% Strongly Oppose 13%12%11%8%9% Don’t know/Refused 2% 1%3%7%

Polls Conducted by HCLA Q3. Please tell me whether you agree or disagree with the following statement: One of the primary reasons health care costs are rising is because of medical malpractice lawsuits. Do you agree or disagree with this statement? 3\044/029/0012/993/95 Total agree72%71%64%63% Total disagree26%28%34%29% Strongly agree49% 38%37% Somewhat agree23%22%26% Somewhat disagree12% 16%13% Strongly disagree14%16%19%16% Don’t Know/Refused2%1% 4%

Polls Conducted by HCLA Q4. Again, please tell me whether you agree or disagree with the following statement: Doctors and health care providers in some states across the country are leaving their practices due to increasing medical liability costs. I’m concerned that this might impact the availability and quality of the care I receive. 3/044/02 Total agree 82%78% Total disagree 16%21% Strongly agree 59%51% Somewhat agree 24%27% Somewhat disagree 8%13% Strongly disagree 8%9% Don’t Know/Refused 2%1%

Polls Conducted by HCLA Q5. Would you favor or oppose a law which guarantees full payment for lost wages and medical expenses, but reasonably limits the amount that can be awarded for ‘pain and suffering’ in medical malpractice cases? 3/044/029/0012/993/95 Total Favor 72%73%72%70% Total Oppose 23%26%25%20%19% Strongly Favor 41%39%43%38%35% Somewhat Favor 31%34%29%32%35% Somewhat Oppose 11% 10% Strongly Oppose 12%14%15%10%9% Don’t know/Refused 5%1%2%6%10%

MAJOR ISSUES The Insanity of the Process THERE IS NO CRISIS – AVG CLAIM PAYMENT IS $30,000, AVG PREMIUM $9,000 INSURERS ARE AT FAULT FOR CRISIS BECAUSE THEY WERE MISMANAGED AND LOST ALL THEIR MONEY ON THE STOCK MARKET MICRA DOESN’T WORK – PROP 103 IS RESPONSIBLE FOR GOOD EXPERIENCE IN CALIFORNIA

Medical Malpractice - Market Review and Update 39

40 Medical Malpractice – Financial Update Source: Tillinghast-Towers Perrin

Major Conclusions Underwriting Losses Primarily Responsible for Rate Increases Increases in CA and Other States With Effective Tort Reforms Have “Without Question” Been Consistently Lower in All Phases of the Cycle