Legislators will soon begin hearings for Gov. Brian Kemp’s much publicized attempt to reform Georgia’s legal system.
For the first time since 2005 – when Republicans gained the majority in the State House for the first time in over a century, giving them full control of the Governor’s office and state legislature – a comprehensive legislative package in Georgia will seek to address some of the state’s most contentious areas of litigation.
One of those areas is healthcare, as hospitals and physicians lament a system that has seen significant cost increases just to carry medical malpractice insurance. But since multimillion-dollar verdicts are typically the realm of John Grisham novels and attorneys advertising on TV, what does that mean for the rest of us?
For Georgia legislators, in 2005 as now, one goal is clear: to determine what healthcare damages are worth from a legal perspective, and consequently, the costs associated with maintaining the status quo.
Notably, much of the existing economic research on tort reform at the state level has focused on the impact of capping damages in medical malpractice cases. This is likely because many of the laws that once limited the amount of money a plaintiff could be awarded were later found unconstitutional by state Supreme Courts, offering tidy bookends to examine the impact of these laws.
In Georgia, the bill that passed in 2005 limited awards in medical malpractice cases to no more than $350,000. For example, in the case that ultimately led to Georgia’s cap being deemed unconstitutional by the state Supreme Court in 2010, Atlanta Oculoplastic Surgery, P.C. v. Nestlehutt, the jury awarded Mrs. Nestlehutt $1.2 million in total damages after cosmetic surgery left her permanently disfigured; under Georgia’s then law, she was only eligible to receive $350,000.
While caps on financial damages are not on the table this time in Georgia, their impact on the insurance market – and the costs that are passed on to providers and consumers – is instructive. Nor is this principle just applicable for healthcare either.
As more carriers quit offering policies in a certain market, insurance premiums rise for the businesses in that community. Kemp highlighted one example, Waffle House’s struggles to find affordable insurance in Georgia, in his State of the State address last month. Without a robust market of insurers offering liability policies, the result for restaurants, grocers and other businesses can be limited operating hours or closing locations completely.
Just as these negative effects in the marketplace are spurring reform efforts in 2025, Georgia legislators were arguably forced into taking action back in 2005. Between 2000 and 2002, 15 of Georgia’s 20 active medical malpractice insurers simply stopped writing new medical liability policies.
Later, a 2011 report by the Georgia Board of Physician Workforce reviewed the period when the law was in effect and found that not only did most insurance companies not institute a rate increase during this time, some companies even reduced their rates. One insurance provider reported an average 18% reduction in the cost of their insurance and premiums. New companies offering medical liability policies also entered the Georgia marketplace during this time as well.1 Board for Physician Workforce: Medical Liability & Tort Reform in Georgia (January 2011)
Now, Georgia lawmakers will attempt to limit the economic damages that can be considered in these cases to the actual expenses incurred for the procedure. Currently, it is permissible in a trial to introduce the initial charges billed by the healthcare provider. These are commonly referred to as “phantom damages” because no one ever actually pays them.
They often reflect the price on your hospital bill that is sent to your insurer rather than what the procedure actually cost the provider – or what the insurer eventually paid for the procedure. Most importantly, when considering economic damages for verdicts, these prices usually have an extra zero or two more than what the patient is expected to pay.
Consequently, these inflated “contractual” costs mean that a defendant’s insurer must be prepared to pay out sums that are much larger, and unrelated to a plaintiff’s expenses, in verdicts. These costs are passed on to providers and consumers.
Georgia’s experience was not an aberration. Other states also instituted financial caps during the early 2000s and saw similar benefits before courts struck them down.
Florida placed caps on non-economic (“pain and suffering”) medical malpractice damages in 2003, including $500,000 per claimant against physicians and other providers, with a $750,000 limit for lawsuits against non-practitioners, such as hospitals. Certain cases held even higher limits, such as $1 million if the malpractice resulted in death or a vegetative state, and $1.5 million in cases of death or catastrophic injury involving non-practitioners.
The Florida Supreme Court ultimately struck that ruling down in 2017, citing violations of equal protection rights. While these caps were in place from 2006-2016, the marketplace for medical malpractice insurance saw increased levels of competition and consumers saw lower premiums. Following the Florida Supreme Court’s ruling, premiums began to increase as award settlements escalated above the rate of inflation.2https://aleragroup.com/insights/navigating-medical-malpractice-insurance-cycle
Illinois enacted caps on medical malpractice damages in 2005, including $500,000 limits for plaintiffs against physicians and $1 million limits in lawsuits against hospitals. The Illinois Supreme Court declared these caps unconstitutional in 2010, citing a violation of the state’s separation of powers clause. However, a 2010 report by the Illinois Department of Insurance for this period reported a decrease of over 10% in medical malpractice premiums and an increase of five insurers offering medical malpractice insurance.3https://floir.com/docs-sf/default-source/property-and-casualty/medical-malpractice-closed-claim-database-and-rate-filing-annual-report/2023-medical-malpractice-annual-report.pdf?sfvrsn=618b62d9_2
Defenders of the status quo argue that Gov. Kemp’s tort reform will merely bring increased profits for insurance carriers and corporations. Yet, competition and choice are essential if we want to ensure that the rising cost of premiums is not simply passed on to consumers.
Take obstetrics, for example. A dozen labor and delivery units in rural Georgia have closed in the past two decades, primarily due to an aging population and a declining reimbursement system. But for those continuing to operate a labor and delivery unit in a rural community amidst these economic challenges, the rising cost of liability insurance – up to five times as much in some cases – is another obstacle to keeping the lights on.
It is important to note that financial caps on medical malpractice remain constitutional in some other states. And while Georgia lawmakers are not seeking a hard cap as before, the reforms they are seeking could well produce similar outcomes regarding decreased premiums and increased insurer coverage as Georgia enjoyed from 2005-2010.
Add your name: Georgia needs tort reform!
Georgia’s legal environment has deteriorated to the point that it threatens all the other good work policy makers have done over the decades. This can be fixed!
