California’s controversial Medical Injury Compensation Reform Act of 1975 (MICRA) could soon change following the efforts of health care and consumer advocates, who worked with California legislative leaders to reach an agreement to modernize the law, resulting in the introduction of Assembly Bill 35 (AB 35) on April 27, 2022. Along with changes to the contingency fee arrangements for plaintiffs’ attorneys, the most significant change in the bill will be an increase in the current cap on non-economic damages, which has been set at $250,000 since MICRA’s enactment. Provisions affecting health care institutions and additional evidentiary protections have also been included in the bill.

Key Changes to the Law

If AB 35 is signed into law, the following notable changes will affect cases filed or arbitrations demanded on or after January 1, 2023:

• For non-death cases, the cap on non-economic damages will increase to $350,000, with incremental increases over the next 10 years to $750,000. For cases involving a death, the cap on non-economic damages will increase to $500,000, with incremental increases over the next 10 years to $1 million. After ten years, the limitations on non-economic damages will be adjusted annually for inflation by 2%. 

• Three separate categories for non-economic damages caps will be created, for a total of three possible caps in each case, regardless of the number of health care providers or health care institutions, or the number of separate causes of action. Health care providers or health care institutions will each only be held liable in one category.

• The law will add a new chapter to the Health and Safety Code establishing additional discovery and evidentiary protections for expressions of sympathy, regret, or benevolence, including statements of fault, made prior to the filing of a lawsuit or demand for arbitration.

• Adjustments will be made to attorney contingency fee limits as follows:

  • 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 a higher contingency fee by filing a motion with the court and establishing good cause.

• The minimum amount of judgment required to request periodic payments will increase from $50,000 to $250,000.

AB 35 Anticipated to Pass

MICRA has been the subject of costly disputes through ballot measures, the courts, and in the legislature over the past four decades. This year was proving to be no exception with a ballot initiative called the “Fairness for Injured Patients Act” (FIPA), which would have effectively eliminated caps on non-economic damages. FIPA will be withdrawn from the November ballot if Governor Newsom signs AB 35 into law by June 30, 2022.

With the support of the legislators from both houses, Californians Allied for Patient Protection, Consumer Attorneys of California, and patient and health care advocate groups, AB 35 seems very likely to pass. Health care institutions, health care professionals, and insurers should review existing policies and procedures, and consult with legal counsel to determine what measures should be taken to align with MICRA’s new framework.