Healthcare Town Hall

The medical professional liability (MPL) insurance industry is currently enjoying an extended period of profitability, with ample capital and a near-record-low loss ratio. But legal and regulatory developments, along with the continued cycles in the market itself, could work to change the MPL situation. Understanding the effects of past underwriting results, claim frequency and severity, pricing, and investment income can provide valuable insights into what the future holds for the MPL industry.

Read the article from the Physician Insurer here.

Medmal medical professional liability, Rich Lord, Stephen Koca

One idea for improving the medical professional liability environment involes disclosing medical errors. This was explored in the paper, “Retooling Medical Professional Liability.” Here is an excerpt:

Often, all an injured patient and family may really want is to hear an explanation and perhaps apology from the doctor and to receive a reasonable monetary award—one that will see to his or her immediate medical and other needs with regard to recovery from the event. In an effort to facilitate this type of exchange, as many as 35 states and the District of Columbia have passed what are called I’m Sorry laws allowing a physician to discuss openly an adverse outcome with a patient and express empathy.

A new study looks at this dynamic at the health system level. Here are details from a recent article in American Medical News:

One health system that has embraced the practice for nine years has concluded that those fears are unfounded. Disclosing medical errors and offering timely compensation to patients or family members do not increase medical liability lawsuits, according to a new study on the University of Michigan Health System’s disclosure-with-offer program published in the Aug. 17 Annals of Internal Medicine.

Under the program, the health system conducts an internal investigation of all medical error reports, notifies patients and offers compensation when employees are found at fault.

The health system has had fewer lawsuits, lower liability costs and faster resolution of medical-error cases since the policy was implemented in 2001. Although researchers could not definitively link those trends to disclosure, they were able to conclude that instituting the program did not lead to more lawsuits.

Medmal medical errors, Medmal

Hospitals that self-insure their professional liability and workers’ compensation coverage should keep an eye on the general rate of inflation. This dynamic is explored in an article in the latest issue of P&C Perspectives: “Estimating the impact of claim inflation on self-insured liabilities.” Here is an excerpt:

For some coverage typically self-insured by hospitals such as professional liability and workers’ compensation, the average time to payment after a claim is reported or incurred is several years. Therefore, the impact of an increase in the claim inflation rate for liabilities for these coverages can be highly leveraged…For example, for professional liability claims, a 1% increase in inflation can lead to liability increases of more than 4%. But, for workers’ compensation claims, a 1% increase in claims inflation can result in increases of more than 10% in the outstanding liabilities.

Economy, Medmal, workers compensation

Chad Karls fielded this question in an interview with Best’s Review. What follows is excerpted from his response:

Any discussion of the medical professional liability market today really needs to start with the financial results of the last few years. The past four years the industry’s combined ratio has been less than 100 which means for the last four years the industry has made a profit from underwriting, setting aside the investment results. That’s four years in a row. To put that in perspective it was 25 years prior to the last four that happened only twice. So we went a period of 25 years in which the combined ratio was less than 100 twice and now for four years in a row it has been less than 100, so certainly unprecedented underwriting results within the industry and that has resulted in a very strong balance sheet across the industry.

That certainly needs to be in the forefront of the conversation about what’s going on in the industry today. Partly as a result of that is what we find ourselves in today from a pricing perspective it’s characterized as a soft and competitive environment. Rates have been trending down the last few years. In fact, A.M. Best put out a report just recently showing that net premiums written have fallen three years in a row for this industry. That, too, has never happened in the past 30 years. We’ve never had three years in a row in declines in net written premium which I use as a proxy for rate levels. That’s certainly representative of a soft marketplace.

Medmal

This is from Best’s Week:

In a recent A.M. Best webinar broadcast on May 12, Chad C. Karls, a principal and consulting actuary from Milliman, described the pressures that some start-up medical professional liability writers have faced.

Karls said there were 154 start-up medical professional liability companies that formed between 2002 and 2008. That group pertains to companies with 95% of their premium in medical professional liability and includes risk retention groups.

“We’ve seen 15 of those now go away in some shape or form,” Karls said during the webinar. “Fortunately, most due to acquisitions or voluntarily saying I’m done with my self-insurance program, the market is softening now and I’m going to set aside this captive or this risk retention group, whatever it is that I set up and 15 of those have gone away. So, that’s not an insolvency, but that has been one of the reasons why some of these companies are no longer in existence of the start ups that we identified.”

Medmal Chad Karls, Medmal

Today from Best’s:  

A few pockets of increasing frequency in medical claims are just that for now, but still have the attention of Chad C. Karls, principal and consulting actuary for Milliman.

Karls said he’s noticed a recent upward tick in frequency among some results from separate, individual companies. Should those results become more widespread, it could well signal that frequency hit the bottom of a trough in 2007-08.

“There are some indications that it might be the case, but it’s not universal enough to make the call yet,” Karls said.

The full article is available here (password required). More from Chad Karls here.

Medmal Chad Karls, Medmal

On Monday, we blogged about new analysis of a court decision to reverse medical malpractice damage caps in Illinois. Subsequent coverage offers more detail—and also some alternative perspectives.

First, perspective from AM Best’s, which gives the five-year view of Illinois tort reform:

The court found that portions of a 2005 statute that capped noneconomic damages at $500,000 against doctors and $1 million against hospitals violated the separation of powers between the Illinois General Assembly and the judiciary. The case, Lebron vs. Gottleib Memorial Hospital et al, was filed by Frances Lebron, the mother of baby Abigaile Lebron, who was born at Gottlieb with “numerous permanent injuries” allegedly sustained during a Caesarean procedure, the court noted. Lebron filed suit against the hospital and her medical team in 2006, and in 2007 the Cook County Circuit Court found the caps unconstitutional (BestWire, Nov. 13, 2007).

The Milliman study buttresses insurers’ argument that the cap is good for Illinois, said Jeffrey Junkas, a spokesman for the American Insurance Association. Moreover, the legislature is unlikely to act to rectify the ruling anytime soon, he said.

“There’s no appetite to address this issue again,” Junkas said. “We may have to get back to that crisis condition we had in ‘03 and ‘04.”

Without a cap from 1997 to 2005, Chicago physicians saw liability premiums jump an average of 10% to 12% a year. When the cap was reinstated in 2005, premiums for Chicago physicians stabilized and even began to shrink, according to the American Medical Association (BestWire, Feb. 4, 2010).

The top Illinois writers of medical professional liability coverage in 2008, according to BestLink, were: ISMIE Mutual Group, with 55.3% market share; APCapital Group, 5.2%; Berkshire Hathaway Insurance Group, 4.5%; American International Group, 3.8%; and ProAssurance Group, 3.2%. BestLink provides online access to A.M. Best’s Global Insurance & Banking Database.

Read more…

Medmal Chad Karls, Illinois, medical malpractice

New analysis indicates that the Feb. 4 decision by the Illinois Supreme Court overturning caps on non-economic damages awarded to medical malpractice claimants is likely to increase physician liability costs in the state by 18%. 

The magnitude of the estimated increase is largely a reflection of the tort environment in Illinois,” said Chad C. Karls, principal and consulting actuary for Milliman, who specializes in medical professional liability coverage.  “The overturn of a $500,000 cap on non-economic damages would have less impact in almost any other state.  In Illinois, claim severities have been among the highest in the country.  In addition, experience in other states suggests that the overturn of a cap like this can result in significant increases in the number of reported claims going forward. This would result in additional increases in costs for insurers.”

Indemnity claim severities will increase by approximately 23% and the average cost that insurers expend defending claims will increase by 10%.

See the full release here.

Karls has also written about retooling medical professional system.  That analysis is available here.

Medmal, Reform Chad Karls, Illinois, medical professional liability, Medmal, Susan Forray

Medical professional liability claims frequency has declined in recent years. But that may be changing. Here is an excerpt from a recent Best’s Week article:

Chad Karls, a principal and consulting actuary at Milliman who specializes in medical professional liability, said frequency in 2008 and 2009 is no longer falling and has even increased in some spots.

“That needs to be kept in perspective,” Karls said. “While it may be increasing, I don’t see it at the 2002-03 levels.”

Karls was referring to a tumultuous period for medical professional liability of nearly a decade ago. It arrived after the largest medical malpractice writer in the United States chose to forego the line and take a $900 million write-down. St. Paul Cos., which has since merged with Travelers, had written 9% of that sector’s direct premium in 2000 before pulling out, according to A.M. Best data.

What followed was a call for tort reform measures to mitigate jury awards and litigation costs, along with a heightened public awareness of the rising insurance costs that physicians faced. Karls said the medical community successfully framed that pushback effort as an access-to-care issue for patients at large.

Medmal Chad Karls, claims frequency, medical malpractice

Might new ideas find their way into a revised healthcare reform bill? The Wall Street Journal offers this perspective:

Malpractice is one area where Democrats could show more flexibility in any revamped legislation. Reducing unnecessary lawsuits is an area that resonates with voters, regardless of party affiliation, and Democratic leaders have already added some malpractice provisions into the current bills, though they remain largely symbolic.

Indeed, a number of innovative ideas could help improve the medical professional liability system in the United States. Find more details here.

Medmal Chad Karlsh, medical malpractice