Healthcare Town Hall

An analysis based on the composite financial results of a large group of insurers that specialize in medical professional liability (MPL) coverage shows a steady drop in premium but remarkable calendar-year profitability nonetheless. However, despite the strong financial results, it appears that the MPL insurance market is continuing to soften. As the healthcare industry goes through a period of dramatic change, there is significantly more uncertainty in both the future of MPL claim costs and the future of overall MPL insurance market conditions.

Download and read the entire article here.

This article was originally published in the May issue of the Medical Liability Monitor.

Liability, Medmal Bradley Parker, Charles Mitchell, medical professional liability

Healthcare reform, mergers and acquisitions, expanding regulatory requirements, and downward pressure on reimbursement and margins create a challenging environment for healthcare management. Although self-insurance can help control total insurance expenses, staying up to date on the financial reporting requirements for this option can be difficult.

This article offers guidance on the key financial reporting issues for medical professional liability (MPL) self-insurance programs. Here is an excerpt:

The following practices will help in keeping on the right course toward full compliance in financial reporting.

• Update the key parties whenever you make changes. Frequent conversations are beneficial. At minimum, you should have annual conversations with the actuary and auditor. If changes occur, in either the program or your loss experience, it is important that all parties understand all of the program changes that have been enacted by management, as soon as possible. Table 1 shows some common questions.

• Create a checklist of requirements. The best way to stay “on top” of the requirements may be to use a single source that lists all of the requirements and indicates when each is due. In addition, it may make sense to determine who will complete each task and to have a strategy in place for efficiently completing the task.

• Seek timely advice. Guidelines are best interpreted by experienced professionals who have the skills needed to understand the current practices and communicate any change from the past. Auditors and actuaries make every effort to update management on a timely basis of any changes that would affect the financial reporting of the entity’s liability, but you can help out by proactively asking for advice for any changes you find out about.

• Request more frequent evaluations. When a program experiences adverse or favorable loss activity or undergoes multiple changes during a fiscal year, you can always ask for an interim actuarial study. You’ll need to determine your comfort level with the program’s current amount of activity, with the goal of reducing year-end “surprises.” Additional analysis may also be helpful during an audit.

Reprinted from the First Quarter 2013 issue of Physician Insurer Magazine, Physician Insurers Association of America.

Medmal medical professional liability, Richard Frese, self-insurance

What does the future hold for medical professional liability insurance? In an interview with the Professional Liability Underwriting Society (PLUS), Milliman principal Chad Karls discusses new factors affecting the industry and past trends that provide an indication of where the industry is headed.

Liability Chad Karls, medical professional liability

Harmful medication errors, or preventable adverse drug events (ADEs), are prominent quality and cost issues in healthcare. Injectable medications are important therapeutic agents, but they are associated with a greater potential for serious harm than oral medications. The economic burden of preventable ADEs associated with inpatient injectable medications and the associated medical professional liability (MPL) costs had not been previously described in the literature.

This study finds that the healthcare and MPL costs associated with preventable ADEs are substantial. The authors estimate that inpatient preventable ADEs associated with injectable medications increase annual U.S. payor costs by $2.7 billion up to $5.1 billion, while MPL costs associated with injectable medications total $300 million to $610 million annually.

The study was published in the December 2012 issue of American Health & Drug Benefits.

Cost adverse drug events, Bruce Pyenson, Healthcare, Helen Blumen, Kosuke Iwasaki, medical professional liability, Susan Forray

With the end of 2012 quickly approaching, a new article published in Medical Liability Monitor examines what the financial results of medical professional liability (MPL) specialty insurers as of the third quarter this year might foretell with regard to year-end results. Based on data compiled by SNL Financial, the article compares the composite financial results of this group as of September 30, 2012, with composite results at year-end over the past decade, and discusses what financial results might look like for MPL writers as a whole as of year-end 2012.

Download and read the entire article here.

This article was originally published in the December 2012 issue of the Medical Liability Monitor.

Liability medical professional liability

Financial reporting of medical malpractice self-insurance is evolving. The accounting and financial reporting guidelines for medical malpractice, which are governed by the Financial Accounting Standards Board, are changing to uphold some historical practices and adjust others. This evolving landscape includes a review of the practice of discounting medical malpractice liabilities, medical malpractice litigation reform efforts in several states, and the potential impact of accountable care organizations (ACOs) on medical malpractice insurance.

This article describes the history of medical malpractice self-insurance, the current medical malpractice insurance landscape, and future trends affecting medical malpractice insurance.

Medmal medical professional liability, Medmal, Richard Freese

In a recent article, Chad Karls, editor of the Medical Liability Monitor’s 22nd Annual Rate Survey, explores when the medical professional liability (MPL) market will break out of its current state and examines other factors influencing the MPL insurance market. He describes how that market arrived at its current position and the contradictory state of the market today; he also offers new ideas about how long it will be before the market begins to harden and why that will be necessary before change can occur.

This article was published in Medical Liability Monitor.

Medmal Chad Karls, medical professional liability, Medmal

Since the late 1990s, a cycle generally familiar to the insurance industry has been playing out in the medical professional liability (MPL) market. During the late 1990s and early 2000s, insurers’ costs increased rapidly. By 2001, after a bit of a lag, insurers started increasing their pricing. Then, between approximately 2003 and 2007, claim frequency dropped significantly for a number of reasons—patient safety initiatives, tort reform, public sentiment, and others. Meanwhile, net earned premiums continued to rise, peaking in 2006.

While this was occurring, insurers continued to increase rates, in an effort to correct prior rate inadequacies. As a result, reserves built up, allowing insurers to ease up on premium prices. This set in motion a wave of declining prices, in a fiercely competitive market that continues to this day. The results, in terms of policy writing and profits, have been phenomenal on a calendar-year basis.

However, the price war has escalated to the point where reserve releases have become the primary undergirding of profits. Today’s stellar financials are possible only because insurers are still reaping the benefits of the earlier high prices, at the cost of reserves, which have been steadily declining in the most recent years. There is reason to believe that current pricing, geared to the competitive market but likely inadequate to sustain ongoing profits, will not work much longer.

To read the entire article written by Stephen Koca and Richard B. Lord, click here.

Reprinted from the Third Quarter 2012 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2012.

Liability medical professional liability, Richard B. Lord, Stephen Koca

The familiar trends from recent years continued during the first half of 2012 for medical professional liability (MPL) specialty insurers. Calendar-year, net-after-tax income continues its downward trend along with premium volume. Overall calendar-year results are strengthened by familiar reserve releases, which act as camouflage for softening rate levels. Nonetheless, the aggregate bottom line for MPL specialty writers continues to be strong. This analysis identifies patterns in the historical relationship between the financial results at the end of each quarter compared to the financial results at year-end. Examining this relationship, together with our view of current market trends, we project what the year-to-date 2012 results might foretell about future market conditions.

Download and read the entire article here.

This article was originally published in the September issue of the Medical Liability Monitor.

Liability medical professional liability

The medical professional liability (MPL) insurance industry has seen lower overall claim costs, driven by a recent decline in the number of MPL claims. The unexpected magnitude and duration of the decline in claim frequency have precipitated a favorable runoff in unpaid claim reserves since 2005.

Some industry observers believe that there continues to be an industry-wide redundancy in unpaid claim reserves at this point. This apparent redundancy, which shows up at the industry-wide level, may not translate down to the level of individual companies. The statistical properties of unpaid-claim liabilities at the company level, where reserving decisions are made, differ from those of the industry as a whole.

Favorable reserve developments should not lead to a conclusion that reserves are being set too high. If individual companies set reasonable claim reserves, the industry’s total reserve will likely still develop favorably more often than not.

Read the entire study on MPL industry unpaid-claim reserve here. 

Reprinted from the Third Quarter 2012 issue of Physician Insurer Magazine, Physician Insurers Association of America. Copyright, 2012.

Liability medical professional liability