Healthcare Town Hall

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

What follows is excerpted from a recent healthcare reform briefing paper by Chad Karls, “Retooling Medical Professional Liability”: 

Clinical guidelines are not a new idea, but the idea of using them to shield doctors from malpractice lawsuits has gained some purchase of late. The idea is to establish a list of agreed-upon, evidence-based guidelines, which, if followed, would give physicians and other healthcare providers safe harbor from claims of malpractice. In addition, if physicians are in fact protected from medical negligence lawsuits provided they follow such guidelines, this could have an additional and significant benefit of reducing the level of defensive medicine that takes place.

Read more…

Evidence-based Requirements, Medmal, Reform Chad Karls, medical malpractice, Milliman Care Guidelines

The discussion over how to overhaul the medical professional liability environment continues to evolve, with the White House this week indicating it would consider some alternative to jury trials. The idea of medical or health courts is discussed in the recent paper by Chad Karls, Retooling Medical Professional Liability. Here is an excerpt.

The facts and testimony delivered at medical liability trials can become dense and arcane, difficult for lay juries to adequately evaluate. Some have proposed the establishment of special medical or health courts, which like family, bankruptcy, or landlord-tenant courts could be set up to hear only cases involving one type of legal conflict—in this case, medical liability claims.

Special medical liability courts could go a long way toward speeding up resolution and reducing the costs of adjudication and the idea is worth further discussion, but there are issues that would have to be addressed. Would cases be heard by special judges alone, or by a predetermined pool of experts in the medical specialty relevant to the claim? It seems unlikely that any one judge, even one with medical training, could be fully conversant with enough areas of medicine to deal with all of the complexities involved in different cases.

Regardless of whether claims are heard by medically trained judges alone or judges and expert juries of medical professionals, the plaintiffs’ bar is unlikely to agree to any system that appears to turn all of the decision-making power in the adjudication process over to the medical community. In February 2006, the House of Delegates of the American Bar Association passed a resolution specifically opposing the creation of health care tribunals.

See the full paper, including citations, here.

Medmal, Reform Chad Karls, medical malpractice

What follows is excerpted from the recent healthcare reform briefing paper, “Retooling Medical Professional Liability,” by Chad Karls.

While not an entirely new concept to medical professional liability, special injury funds are programs operated by individual states to afford doctors and other healthcare professionals’ liability insurance coverage for specific injuries.

Special injury programs recognize that certain procedures are medically complex and that a bad outcome could result in catastrophic injury to the patient, often involving lifelong complications for the patient as well as the family. The costs associated with providing for the injured patients’ needs can easily add up to several million dollars. These injured patients are arguably those with the greatest and often most immediate needs, yet within the confines of the current adjudication system the patient commonly finds him- or herself mired in the system for many years as the attorney, along with the insurance company, both begin the multi-year process of preparing the case for trial. Given the economic stakes involved, both the patient’s attorney’s and the insurance company’s actions are understandable. What is not always understood, however (or at least not always kept at the forefront of the discussions), is the perspective of the patient.

Special injury funds can offer an alternative for just these types of claims and seem to work best when they are narrowly focused, managed like a true insurance vehicle with accrual-based financial considerations, and protected against outside political interference. Both Florida and Virginia have special injury funds currently in place that apply to claims involving birth-related neurological injuries.

The Virginia Birth-Related Neurological Injury Compensation Program, established in 1987, appears to be an effective way to compensate birth-related neurologically impaired children. According to a January 2003 report of the Joint Legislature Audit and Review Commission of the Virginia General Assembly, “[o]verall, it appears that the benefits offered by the program are generally more advantageous to birth-injured children than a medical malpractice award in Virginia.” The same report does, however, go on to list several challenges faced by the program, including one subheading that reads, The Birth-Injury Fund Is Actuarially Unsound, Although There Is No Threat of Short-Term Deficit.

Click here to see the full paper, including citations.

Medmal Chad Karls, special injury funds

Based on a Milliman analysis of more than 30 years of medical professional liability (MPL) insurance industry data, as reported to state insurance departments in annual financial statements, the distribution of how premiums are spent in the current tort system of adjudicating claims breaks down as follows: 

• 27% is for the insurance industry’s claims management costs, which include:
  • 22% for defense counsel, expert witnesses, litigation, technology fees, and other court costs
  • 5% for insurance company oversight of claims
• 15% is spent on insurance company overhead and expenses (e.g., agent commissions, state premium taxes, etc.)
• 19% pays for the claimant’s (plaintiff’s) attorney
• That leaves 39% for final disbursement to the claimant when the entire adjudication process has finally reached its conclusion three and a half to five or more years after the original incident

See the new paper, “Retooling medical professional liability,” for more information.

Efficiency, Medmal Chad Karls, medical malpractice, waste

The American medical professional liability (MPL) system is both adversarial and inefficient. As the conversation over healthcare reform continues, the timing may be right to reconsider the current approach to MPL (aka “medmal”).

Milliman principal Chad Karls, an expert on MPL issues, tackles this topic with the latest Milliman healthcare reform briefing paper.

Medmal, Reform Chad Karls, medical professional liability