Do Noneconomic Damage Caps Reduce Medical Malpractice Insurance Premiums? Evidence from North Carolina.

Abstract

The impact of medical malpractice reforms, especially caps on noneconomic damages, is of special interest to policymakers and physicians. Adopting such caps has become rare during the past decade, and most existing analyses study state reforms occurring during periods of dramatic rises in malpractice insurance rates. This study contributes to the literature by examining how caps implemented in non-crisis periods affect malpractice premiums. It examines the effect of the 2011 North Carolina's adoption of a noneconomic damages cap by comparing county-level malpractice premiums for three specialties between North Carolina and states without caps both before and after the reform. It finds little evidence of pre-existing trends, followed by a lagged but significant reduction in premiums for each of the studied specialties in North Carolina. The timing and size of the effects are comparable to findings from the literature studying malpractice reforms passed during times of more dramatic liability trends.