Private insurers enjoy some key advantages over the CAT Fund's way of doing business, claims John Doyle, regional vice president of PIE Mutual, another malpractice insurer in the state. They also have prepaid defense lawyers as an internal resource, offering more control and security over cases, Doyle indicates. If full coverage were to be provided by the private companies in PA, it would be underwritten by specialty and individual risk assessment, Doyle says. That type of underwriting is a sensible approach, as it preserves deterrence in tort contexts, believes Patricia Danzon, Ph.D., Celia Moh Professor, Wharton School. The basic premise of a sound tort system, she explains, is to deter persons from causing harm.
Insurance gets in the way of that deterrence.
If the cost of insurance is rated based on expected costs, that is a better deterrence than the present structure of the CAT Fund premiums, she believes, which shifts costs across generations of physicians. Managing malpractice claims would be more efficiently done by one insurer, Danzon argues, than by a basic insurer and a catastrophic insurer. An inherent problem of the CAT Fund, it could be argued, is that it lacks the discipline required of entities that must compete on cost and quality. In addition, the mandatory nature of the CAT Fund leaves no choice for physicians who do not wish to participate, short of breaking the law. A private market would open up a number of choices and alternative arrangements for physicians.