Underlying many of the most contentious issues being debated today is the question of whether we are a democracy or a republic. Whether it’s the Electoral College versus a popular vote or the differing decisions of state governors about COVID-19 restrictions, the Founders felt that a republic would not only better protect the rights of minorities but also stimulate innovation at the state level. That’s exactly what has happened, and an example ready to adopt is relevant to the debate over the coronavirus stimulus bill: The approach and results have been in place in Texas for several decades.
In the 1970s, medical malpractice insurance in Texas was getting too expensive and choices were limited. The Texas Medical Association (TMA) addressed this problem by allowing the creation of a self-insurance trust for the TMA through legislative efforts. The result was the development of the Texas Medical Liability Trust (TMLT). The TMLT stabilized the insurance market in Texas, allowing for predictable and more affordable coverage for providers. The services expanded to include mid-level practitioners who work beneath TMLT-insured providers through a wholly-owned entity, Texas Medical Insurance Company (TMIC). This provided further relief as the medical world changed toward increased use of mid-level providers. TMLT now is the largest medical malpractice insurance provider in the state.
In the 1980s, workers’ compensation care in Texas was a disaster. The networks were inadequate and costs were out of control. In 1991, the Texas legislature created mutual insurance in an effort to stabilize the market and bring down costs. The Texas Workers Compensation Insurance Fund was founded and ultimately became what is known today as the Texas Mutual Insurance Company (Texas Mutual). Within two years of its founding, Texas Mutual was the largest in the state for companies that needed it as a last resort. Today, Texas Mutual controls 40 percent of the market. As a mutual company, it gives money back to policyholders based on cost-savings. Over the past 22 years, $3.1 billion has been distributed in dividends, including $330 million in 2020.
Today’s debate centers on the appropriateness of reducing or eliminating liability for businesses regarding coronavirus claims. A majority of small businesses would prefer another stimulus package and there is bipartisan support for passage of such a bill. Congress is divided on how to address the pending financial liability that businesses face over the coming years of litigation.
The Texas experience shows that sometimes our legislators must step in to provide a government-sponsored solution or to create a favorable environment for innovation in the insurance industry. Either option would seem to allow for the creation of insurance companies to specifically address and support businesses to ensure that they are protected from significant financial losses from COVID-19 lawsuits. In either plan, further help should be provided to struggling companies through subsidies for those hardest hit by the pandemic. These subsidies could vary by industry, or by impact of the pandemic on individual companies. Both sides of the aisle could support this; it will provide liability protection and it utilizes broader government involvement and the potential creation of a government entity in what is traditionally a private space.
In addition, there are bound to be other pandemics or catastrophes that will require some form of liability protection. This solution not only would solve the current problem, but also provide businesses with the necessary protections for future business liabilities and disruptions. Many companies have found that their business interruption policies do not provide support for infectious pandemics.
Through legislative action, the insurance market could pivot to providing peace of mind for businesses and municipalities alike. Appropriate insurance products could be created so that every company or city could invest in its future without concern about whether or when the federal government might provide relief.
The lessons learned from Texas’s experience in the insurance market provides a solution to the concern about legal liability related to the coronavirus pandemic and a long-term answer for future unforeseen catastrophes. Congress must act soon to provide relief to businesses struggling across the United States. Unique options such as those tested in Texas must be considered to allow the stimulus package to pass and protect our economy.
Adam Bruggeman is a spine surgeon in Texas, board-certified in both orthopaedic surgery and addiction medicine. He is a member of the board of councilors for the American Academy of Orthopaedic Surgeons and the recent past president of the Texas Orthopaedic Association. Follow him on Twitter @DrBruggeman.