MICRA and AB 35 Alert

In 1975, physicians in California faced a crisis of spiraling malpractice insurance premiums, which drove up healthcare costs and limited patients’ access to care. In response, physicians and other stakeholders banded together to pass MICRA, which CAP has repeatedly defended in the courts and at the ballot box.

We are disappointed that the California Medical Association and other large healthcare associations and malpractice insurers decided not to fight the “Fairness for Injured Patients Act” (FIPA) ballot initiative this fall. Instead, they made a deal with the trial attorneys to craft AB 35, which permanently alters and diminishes the fundamental protections of MICRA. AB 35 was signed into law by Governor Gavin Newsom on May 23, 2022.

AB 35 makes the following significant changes to MICRA that will impact cases filed on or after January 1, 2023:

  • For non-death cases, the cap on non-economic damages will increase from $250,000 to $350,000, with incremental increases over the next 10 years to $750,000 and thereafter, adjusted annually for inflation by 2%
  • For cases involving a patient death, the cap on non-economic damages will increase to $500,000, with incremental increases over the next 10 years to $1 million and thereafter, adjusted annually for inflation by 2%.
  • The law also creates three separate stacks for non-economic damages caps that plaintiffs may take advantage of to collect from multiple providers and medical facilities, thereby exponentially increasing the damage cap as early as January of 2023.

The bill also increases attorney contingency fees:

  • 25% of the amounts recovered, if the recovery is due to a settlement agreement and release of claims executed by all parties prior to the filing of a civil complaint or arbitration demand.
  • 33% of the amount recovered, if the recovery is pursuant to a settlement agreement, arbitration, or judgment after the filing of a civil complaint or arbitration demand.
  • If a case has been tried or arbitrated, plaintiffs’ attorneys will be permitted to seek an even higher contingency fee by filing a motion with the court and establishing good cause.

Many organizations have suggested that AB 35 was the only fair solution and compromise for avoiding the FIPA ballot measure that would have removed MICRA’s protections. CAP’s recent polling showed that the FIPA initiative could have been readily defeated, and CAP was prepared to lead the fight against this anti-MICRA initiative, just as we did in 2014. Over the past several months, CAP worked diligently to ensure our physician members were aware of the negotiations to undermine MICRA and were afforded opportunities to share their concerns with CMA and legislators.

AB 35 will undoubtedly be a significant challenge for all healthcare providers in our communities. Fortunately, CAP does not anticipate a material increase in rates when its next assessment is levied this November due to CAP’s efficient and unique business model designed specifically to maintain stability as much as possible during turbulent market shifts. CAP’s prudent fiscal management, disciplined underwriting practices, and accurate forecasting of claims frequency and outcomes offer our physicians excellent protection from unanticipated circumstances like AB 35.

CAP is committed to helping its more than 12,500 physicians navigate the coming changes and will be unwavering in our efforts to ensure California’s independent physicians continue to have access to secure and affordable medical professional liability coverage and dedicated resources to help them run successful medical practices.

More information and resources will be shared here as they become available. For assistance, please call Membership Services at 800-610-6642.