Proposed changes to rules that govern medical malpractice lawsuits are supposed to reduce costs and attract more doctors to North Carolina.

Yet the two companies that write half of all malpractice insurance policies in North Carolina are enjoying a record-breaking financial year even without these changes. Medical Mutual and MAG Mutual earned significant profits in 2010 and bragged about a series of fiscal milestones in their latest annual financial reports.

These companies also noted massive success rates in winning malpractice suits, contradicting at least one claim legislators have made in pushing for reform: that juries often favor the victims and award excessive monetary damages, unreasonably threatening good doctors’ careers.

Based on the industry’s own figures, anyone who argues that North Carolina doctors face a major threat from patient lawsuits is “absolutely crying wolf,” said Laurie Sanders, executive director of the N.C. Coalition for Patient Safety.

The coalition is an advocacy group working with trial lawyers to fight Senate Bill 33, the malpractice tort reform bill that has already passed the N.C. House and Senate with a veto-proof margin. That bill still must be finalized by legislators from both chambers, who are meeting to work out differences between the House and Senate versions of the bill.

Sanders’ son died six years ago, and she settled a malpractice claim out of court. She believes that had SB 33’s $500,000 cap on damages for pain and suffering that juries can award patients been in place then, it would have been harder for her to have found a lawyer willing to take the case. And had there been a tougher standard to prove malpractice in emergency cases, which is in the Senate version, but not the House, it would have been essentially impossible.

Sanders was bothered by what she found in annual reports for Medical Mutual and MAG Mutual, which together cover 50 percent of the state’s malpractice insurance market, according to the state Department of Insurance.

In April, MAG Mutual declared “the largest dividend in MAG Mutual history$16.5 million,” according to the company’s 2010 annual report. That money goes to more than 17,000 policy holders, effectively lowering what the doctors, nurses and other medical practitioners pay for malpractice insurance.

The report goes on to describe 2010 as “one of the best financial years in the company’s history” with record levels for assets and policy holders’ surplus, as well as the lowest level of claim payouts to plaintiffs in at least four years.

In fact, MAG Mutual won 91 percent of the malpractice cases against its policy holders last year, the report states. In 2009, the company had a 100 percent success rate.

Medical Mutual, which is owned by doctors and writes 31 percent of malpractice policies in North Carolina, also had a banner year.

“New records were achieved with 2010 assets, capital, policy holders’ surplus and net income,” Medical Mutual’s 2010 report states. “We tried a total of 20 cases in 2010, with only one resulting in a plaintiff verdict. The active pending lawsuit count is 516the lowest in over 11 years.”

The Indy contacted both companies to ask whether this record-breaking success undermines the alleged urgency behind malpractice tort reform. A spokeswoman for Medical Mutual said someone would call back to discuss the issue. No one ever did, despite repeated follow-up requests from the Indy, all of which went unreturned.

A MAG Mutual spokesman would only comment via email, despite requests for a telephone interview. His emailed comments did not specifically address the Indy‘s question: If profits are so high, does North Carolina really need malpractice tort reform?

“We are monitoring the North Carolina tort reform legislative proposals, but have no comment on the bills at this time,” MAG Mutual Vice President Mick Chlon wrote. Chlon went on to describe the company’s success as a result of “strong policyholder retention and sound business and fiscal management.”

The strong profits and low payouts may also be part of a national trend. Public Citizen, a watchdog group based in Washington, D.C., recently analyzed 20 years’ worth of data from the National Practitioner Data Bank, which compiles malpractice claim records. That analysis found that “the prevalence and cost of medical malpractice litigation were at their lowest levels on record in 2010.”

There is also some evidence that costs could increase again, though it is difficult to say. Health insurers across the country have reported record years, at least in part because people have not gone to the doctor during the economic downturn. Fewer patients keeps regular health insurance claims down, along with, potentially, malpractice incidents.

Medical Mutual’s 2010 report notes that the “liability insurance industry is very cyclical, and signs are beginning to emerge that we have hit the bottom of the cycle.” The company reported a 3 percent increase for 2010 in lawsuits filed against members.

Though Medical Mutual and MAG Mutual have lobbyists in Raleigh, legislators on the committees that deal most closely with malpractice reform said these lobbyists haven’t been pushing the bill. That job has been left to other groups, including the North Carolina Medical Society and the North Carolina Chamber.

In fact, lobbyists working against SB 33 identified 24 political action committees and special interest groups that are working for medical malpractice reform, but Medical Mutual and MAG Mutual weren’t among them.

So the companies aren’t necessarily crying poverty to the Legislature; they just stand to benefit if the bill passes. Studies have shown that reforms like those in SB 33 do indeed trim medical costs, even if only slightly when compared with the total cost of health care. But what’s unclear is who saves the money.

“Maybe [Medical Mutual and MAG Mutual] are not pushing it directly,” Sanders said. “But a lot of times they convince their doctors that they insure [to push it] … At the end of the day, when you look at who will benefit … it’s not going to trickle down to the general public.”