The spike in medical malpractice awards that prompted an emergency session of the Maryland General Assembly last year has since faded, leading the state's largest insurance carrier to hold the line on rates it will charge doctors next year.

After two years of double-digit premium increases, the Medical Mutual Liability Insurance Society of Maryland attributed its decision to a significant drop in the money it is paying in malpractice cases.

The announcement, made in a letter to policyholders this month, was greeted with skepticism by some trial lawyers, who argue that last year's legislative exercise was a thinly veiled attempt to limit the money patients can receive when their doctors make errors.

"The truth of the matter is there never was a crisis in medical malpractice in Maryland, and this is the framed exhibit," Dennis O'Brien, public relations chairman for the Maryland Trial Lawyers Association, said yesterday.

Advocates for doctors and insurance companies urged more cautious interpretations of Medical Mutual's decision but were at a loss to explain the improving climate. The company insures more than three-quarters of Maryland's private-practice physicians.

"There's clearly been a change," said T. Michael Preston, executive director of the Maryland State Medical Society, the doctors lobby. "The big questions are, 'Of what duration?' and 'Why?' -- and no one knows."

Medical Mutual had raised rates by an average of 28 percent and 33 percent in the preceding two years. An outcry by doctors prompted Gov. Robert L. Ehrlich Jr. (R) to summon lawmakers to Annapolis after spending months using his bully pulpit to drum up interest in the issue.

Lawmakers passed a bill establishing a tax on HMOs to pay for subsidies that would mitigate doctors' rising malpractice premiums. But the Democrat-controlled legislature rejected many of the limits on patients' awards that Ehrlich had proposed.

"We certainly had a crisis in that premiums were becoming unaffordable, and we stepped in and addressed that," said Sen. Brian E. Frosh (D-Montgomery). "The problem with this whole issue is it's difficult to know whether it's a temporary storm or a permanent change of climate."

In a letter to policyholders this month announcing its decision, Medical Mutual said that payouts in malpractice cases had "spiraled" from $47 million in 2000 to more than $93 million in 2003, a company record. Last year, however, payouts dropped to $78.5 million, the company said, and this year's payouts are about keeping pace with last year's.

"I am very glad to report to you that some degree of normalcy appears to be returning to our claims numbers, albeit at a new, higher level," D. Ted Lewers, chairman of Medical Mutual's board, wrote. "Consequently, we will not be filing for any rate increase for 2006."

The legislation approved during the special session included several steps intended to hold down payouts, including a reduction in damages available for "pain and suffering" in wrongful death cases. None of those steps, which were vigorously opposed by trial lawyers, is expected to have a substantial effect on insurance rates for several years, however.

Lawmakers also set up the subsidy fund that effectively capped doctors' insurance increases this year at 5 percent, instead of 33 percent. Payments to Medical Mutual policyholders alone totaled about $27 million this year. The subsidy program is scheduled to stay in effect through 2008.

Medical Mutual's announcement has prompted some questions about the future of the subsidy program, though. The Maryland Insurance Administration, which is charged with administering it, sought legal advice last week as to whether the law technically allows subsidies to flow when companies are not increasing rates.

A lawyer for Medical Mutual argued against such an interpretation in an internal memorandum shared with The Washington Post, suggesting it would produce "an absurd result." The attorney general's office is expected to issue an opinion in coming weeks.

Preston said discontinuing subsidies for Medical Mutual policyholders would effectively boost premiums next year. "That's putting us right back into the soup that put us into the special session in the first place," Preston said.

Frosh said that he sees no reason subsidies should not continue and that any technical problem with the legislation is "fixable."

An aide to Ehrlich, who has urged lawmakers to pass additional limits on payouts, said yesterday that it is too early to tell what Medical Mutual's decision portends.

"Whether that's a trend or an aberration, we'll have to wait and see," said Donald J. Hogan Jr., a policy aide on the issue.

The volatile issue has pitted trial lawyers, insurers and doctors against one another in many states across the country in recent years.

Doctors, particularly those in such high-risk specialties as obstetrics, insist the pinch is real and have blamed large jury awards for driving up insurers' rates. Prominent Republicans, including President Bush and Ehrlich, have used these rate increases to rally support for changes in the legal system.

A study released last month by Missouri's former insurance commissioner, however, argued that the nation's largest malpractice insurers had overcharged doctors during the past five years. The study, which examined data from 15 carriers, found that premiums had doubled during the period while claims payments remained essentially flat.

"Medical Mutual is typical in that they have raised rates much more than their experience justified," said the author, Jay Angoff, who has served as a consultant to Maryland's trial lawyers lobby.

Sen. Brian Frosh says subsidies can go on.Gov. Robert Ehrlich Jr. seeks award limits.