Category Archives: Liability

A decade of profitability: 2013 year-end results for medical professional liability specialty writers

The medical professional liability (MPL) market has sustained favorable financial results again in 2013. This article reviews the 2013 results overall, attempts to glimpse what the year-end results might have in store, and works to detect changes in the current trends that continue to produce stellar financial results for the MPL segment of the insurance industry.

MPL specialty writers, as a whole, enjoyed yet another outstanding year financially. Though the continuation of these outstanding financial results is unsustainable long-term, there is still no clear indication from the year-end 2013 financial statement data that suggests these trends are subsiding.

This article was originally published in the April 2014 issue of the Medical Liability Monitor.

How can hospital and physician groups manage tail liability?

The creation of accountable care organizations (ACOs) is leading hospitals to acquire physicians rapidly. During the process hospitals should consider how a physician’s integration may increase tail liability related to medical malpractice insurance.

Richard Frese’s co-authored article “Managing tail liability” offers hospital and physician groups perspective on tail liability issues that may need to be reflected on the balance sheet.

Here are some specific tail liability considerations:

First, leaders should understand the level of tail liability exposure their physicians face, including exposure related to a physician’s specialty, FTE value, participation in outside activities (such as moonlighting), and prior insurance coverage. This consideration is particularly important when acquiring physicians and when preparing for a physician exit. For example, it is important to know whether the insurance program will provide coverage for prior acts or tail coverage when a physician leaves, and whether a physician will need to come into a program “clean,” with his or her tail liability covered by another organization.

Employed physicians usually are covered under occurrence-based medical malpractice policies. Some organizations may choose to cover employed physicians’ liability through a self-insured vehicle, such as a captive or risk-retention group, or through self-insured retention (a dollar amount that must be paid by the organization before the policy will cover a loss). Nonemployed physicians also may be offered such coverage through an insurance vehicle, but they must secure coverage on their own; the hospital itself cannot provide this insurance. In addition, some healthcare entities purchase commercial claims-made coverage for employed physicians, but will offer physicians the option to purchase occurrence coverage. This approach results in tail liability for the organization.

The article also details solutions that can help hospitals and physicians control these liability expenses:

Use a self-insurance vehicle. Self-insurance is an option, particularly when insurance prices are high during a hard market. Theoretically, an entity experiences savings through the profit, contingencies, and insurer’s expenses built into the rate. Self-insurance also allows an entity to maintain more control of the losses, because the carrier may not be involved until claims reach the excess layer. Pooled physicians might have the additional benefit of obtaining lower insurance rates. But there also is increased risk and variability with self-insurance, because cash flows may not be known up front as they are with commercial insurance. Administrative costs also may increase when claims previously monitored by an insurance company become the responsibility of the self-insured entity. Use of self-insurance also requires greater knowledge of underwriting, and actuarial estimates will be needed for funding future losses.

Consider combined limits between hospital and physicians. Programs that have separate limits for the hospital and physicians may find savings in having a single combined limit. This practice may not be feasible in some states with medical malpractice funds, depending on the rules, but for other states, there are clear advantages. First, programs that have single combined limits experience reduced legal expenses, because alignment of the hospital’s and physicians’ goals and incentives allows for joint defense of claims and reduced “gray boxes” of coverage. This approach also avoids internal situations where the hospital and the physicians blame each other for an incident, as well as situations where the hospital may be brought into a claim as a deep pocket. Combined limits also allow for more protection for physicians, because commercial coverage usually has lower limits.

Ryan Weber, of McGladrey, also contributed to this article.

The medical professional liability market continues to drift in 2013

Chad Karls, editor of the Medical Liability Monitor’s 23rd Annual Rate Survey issue, discusses the current state of the medical professional liability (MPL) insurance market. The MPL market is still calm, continuing the trend of reduced claim frequency that has been seen over the last decade, with no clear explanation for the decrease. However, some fundamental changes could be on the horizon. Small trends, recent patient safety initiatives, and reform ideas could lead to radical changes in the future. A close monitoring of trends is critical for continued financial success in the industry.

This article was first published in Medical Liability Monitor.

First quarter financial results for medical professional specialty insurers favorable

The medical professional liability (MPL) market has sustained very favorable financial results in the face of gradually declining premium and increasing combined ratios. The saving grace for the market continues to be its sizeable reserve releases, which have exceeded $1 billion in each of the last six years for the collection of MPL writers that we consider in our analysis. Through the first quarter of 2013, we are seeing a continuation of the financial trends of recent years. Our consultants project another profitable underwriting year for the composite in 2013, although profit margins will likely decline relative to recent years should the current financial trends continue. Pricing pressure continues to be fueled by increasing surplus levels and the desire to maintain exposures against increasing competition and the migration of physicians to self-insured employment settings. The largest remaining uncertainty lies in the sustainability of prior year reserve releases at the level we’ve observed in recent years.

Download and read the entire article here.

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

2012 financial results for medical professional liability specialty insurers

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.