MICRA and AB 35: What to Expect With the New Law

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 the Medical Injury Compensation Reform Act (MICRA), the landmark law that protects and reduces the cost of medical malpractice coverage for physicians and groups by putting a $250,000 cap on noneconomic damages (pain and suffering) and additional caps on attorneys’ fees in medical malpractice lawsuits.

Over the past 40 years, CAP has staunchly opposed any changes to MICRA and has spent millions of dollars to ensure its protection. This year, alongside our traditional allies, CAP was prepared to defend MICRA once again and fight the Fairness for Injured Patients Act (FIPA) measure set to appear on the ballot this fall.

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When the California Medical Association (CMA) and other large healthcare associations and malpractice insurers decided to negotiate with the trial attorney who introduced FIPA and craft Assembly Bill 35 (AB 35), instead of fighting the anti-MICRA ballot measure, CAP took immediate action.

Over the past several months, CAP worked diligently to ensure our physician members were aware of the negotiations and were afforded opportunities to share their concerns with CMA and legislators.

On May 23, AB 35 was signed into law by Governor Gavin Newsom, to take effect January 1, 2023.

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. However, CAP conducted recent polling showing 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.

Simply put, AB 35 permanently alters and diminishes the fundamental protections of MICRA:

  • 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 noneconomic 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 noneconomic 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.

AB 35 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
  • Plantiffs’ attorneys will be permitted to seek an even higher contingency fee by establishing a good cause and filing a motion with the court if a case has been tried or arbitrated

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 members 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 they become available. For assistance, please call Membership Services at 800-610-6642.