On March 22, 2010 the Georgia Supreme Court, in Atlanta Oculoplastic Surgery v. Nestlehutt, struck down as unconstitutional Georgia’s statutory limitation on non-economic damages in medical malpractice actions.     Georgia had adopted a cap of $350,000 on non-economic damages in any action (including wrongful death) for medical malpractice cases as part of its 2005 tort reform statute. (S.B. 3).   

The 2005 bill enacted a number of measures intended to reduce both the incidence of and decrease the cost of litigation.  In addition to the $350,000 cap on non-economic damages, the bill also included increased standards of proof for certain medical malpractice claims, and a loser-pays offer of judgment rule.

The Court upheld the ruling of the trial court, that the statute was unconstitutional in light of Georgia’s constitutional provision that “[t]he right to a trial by jury shall remain inviolate.” (Ga. Const. of 1983, Art. I., Sec. 1, Par XI(a)).   The Court’s opinion, which was unanimous, looked to prior Georgia cases intepreting Georgia’s unique “right to trial” provision, finding that they prohibited statutory limitations on the right to trial in cases where the common law had permitted a plaintiff to have a trial.  The Court found that a cause of action for medical malpractice was well-established prior to the adoption of Georgia’s Constitution and was, therefore, a right that could not be limited by statute.

Earlier in the month, the Georgia Supreme Court upheld two provisions of the state’s 2005 tort reform statute.  In Smith v. Baptiste the court upheld an offer of judgment rule (codified at O.C.G.A. 9-11-68) that allows a defendant in a tort case to ’shift’ its attorneys fees to the plaintiff if the plaintiff refuses to accept an offer of settlement and ultimately fails to recover more than the amount offered.    And in Gliemmo v. Cousineau the court upheld the Georgia statute’s limitation of liability for emergency room doctors which limits liability only to claims resulting from “gross negligence only as shown by clear and convincing evidence.”

Merlinos & Associates can help you assess the effects of tort reform rulings in your business, including reserving and pricing issues.  See our Areas of Expertise for more details.

On September 16, 2009 Senate Judiciary Committee Chairman Patrick Leahy, D-Vt. introduced the Health Insurance Industry Antitrust Enforcement Act, legislation intended to eliminate a federal antitrust exemption for health insurance and medical malpractice insurance companies. 

Specifically, the bill would repeal the antitrust exemption that was established in the 1945 McCarran-Ferguson Act.   The two key provisions of the Health Insurance Industry Antitrust Enforcement Act will repeal the federal antitrust exemption for health insurance and medical malpractice insurance companies for price-fixing, bid rigging, and market allocations.  Senator Leahy said his bill would “subject health insurers and medical malpractice insurers to the same good-competition laws that apply to virtually every other company doing business in the United States.”

Senator Leahy’s 2009 bill is a narrower version of H.R. 1583 (“Insurance Industry Competition Act of 2009”), introduced in March 2009 by Reps. Gene Taylor, D-Miss., and Peter DeFazio, D-Ore., and a bill introduced by Senator Leahy in 2008.  The House bill would apply to all insurance companies (life, health, and property-casualty).

Enacted in 1945, McCarran-Ferguson delegates to the states the authority to regulate and tax “the business of insurance,” and establishes that no federal law should be presumed to interfere with that authority. McCarran-Ferguson specifically exempts from government and private enforcement of the federal antitrust laws conduct that constitutes the “business of insurance,” as long as the conduct at issue is regulated by a state and is not an act of boycott, coercion, or intimidation.  Bid-rigging and other unfair trade practices are still illegal. Price discrimination on any basis other than expected cost is illegal.

In addition, McCarran exempts insurers from specific provisions in federal anti-trust acts (Sherman Act, Clayton Act, and Federal Trade Commission Act) on the condition that the domiciliary state has appropriate antitrust legislation.   McCarran-Ferguson’s limited exemption has permitted insurance companies and other market participants to engage in certain activities that might otherwise be prohibited under the federal antitrust laws. The activities have included sharing loss-experience data, standardizing policy forms, and creating joint underwriting associations.

The House and Senate bills would not change existing state regulation of insurance-related activity.

While it would seem that removing the McCarran-Ferguon exemption from health insurers is a logical extension of the current health care debate, it is not clear why medical malpractice insurers were included.   Additionally, the bill makes no distinction on how it is to be enforced on just the medical malpractice business of companies that sell this insurance as part of their overall portfolio.

Repeal of the anti-trust exemption of McCarran has been debated fiercely over the years, and the introduction of these bills will surely bring additional heated discussions on this subject, as well as the many different aspects being debated on federal vs. state regulation of the insurance industry.