Over the past 10 to 15 years, medical professional liability (MPL) insurers have been fortunate to have enjoyed profitability strong enough to take the edge off the necessity of a deep structural market change. But the time is coming when insurers will have to face the reality. How will MPL insurers compete in a shrinking market and what will their role be? Milliman consultants Richard Lord and Stephen Koca provide some perspective in their article “A difficult time: MPL insurers navigate the future.”
This article was published in the 2016 Third Quarter issue of Inside Medical Liability.
Hospitals and health systems seeking to acquire physician groups can increase their negotiating power, and reduce overall claims costs, and more. However, these organization need to vet a physician group’s medical malpractice coverage thoroughly to better understand the financial implications involved with its acquisition.
In their article “Medical malpractice insurance: A key concern when acquiring physician groups,” Milliman’s Richard Frese and Andy Hoffman discuss the importance of assessing a physician group’s insurance policy. The following excerpt provides perspective on some coverage costs that hospitals should examine before executing an acquisition.
Several key costs must be estimated to provide management with the best information to make an appropriate decision. A critical cost that should be estimated is the unpaid claims liability—i.e., the amount the group is responsible for in the incidents that occurred up to a certain date. Medical malpractice is a long-tailed line of business, has losses that can vary drastically from year to year, and can have significant lags between the occurrence and reporting of claims. These factors can make the estimation of unpaid claim liability difficult.
In addition to estimating unpaid claim liability, which is essential, hospitals and health systems can benefit from other estimations that are less frequently performed. For example, to demonstrate the benefits of acquisition, the insurance costs can be estimated for the hospital and physician groups separately and combined. The projected future losses for the physician group can be estimated as a basis for comparing commercial insurance rates to determine whether it makes sense to retain the costs or purchase commercial coverage.
Considered together, the cost differences, benefits, and risk factors can help hospital and health system leaders decide whether acquiring a physician group makes sense. Failure to account for a physician group’s losses, especially if the group has had adverse loss experience, can be financially disastrous. However, by carefully planning for costs and undertaking proper risk management and consolidation efforts, an acquiring organization can ensure that a physician practice acquisition will be beneficial to all parties involved.
The medical professional liability (MPL) market began 2016 experiencing similar trends to those seen in recent years. The first quarter of 2016 has seen the market maintain favorable calendar-year financial results despite declining premium volume and steadily increasing operating ratios. If the historical relationship between first quarter and year-end holds, MPL speciality writers can expect weaker financial results, compared with recent years, yet still an overall profitable year. This article by Milliman’s Brad Parker and Eric Wunder provides more perspective.
This article was originally published in the July 2016 issue of the Medical Liability Monitor.
Surplus grew slightly in 2015, leaving the medical professional liability (MPL) industry in a financial position roughly consistent with where it has been since the end of 2011. The increased capitalization and favorable operating ratios in the MPL industry of late have had one primary cause, the release of prior-year reserves. In 2015 in particular, reserve releases contributed 24 points to the industry’s operating reserves. The reserve releases are similar to those during 2014 and represent a decline relative to each of the years 2008 through 2013. Milliman consultants Chad Karls and Susan Forray provide more perspective in their recent Inside Medical Liability article.
Medical professional liability financial results for 2015 are telling a tale similar to the one told in 2014. For calendar year 2015, this segment of the casualty insurance industry can boast yet another healthy bottom line, but we should take note that declines in both the premium level and the amount of favorable annual reserve development appear to be taking their toll on overall net income. Total written premium during 2015 dropped by 4.4% when compared with 2014, making it the largest single-year percentage decline in premium since 2007-2008. Steadily declining premium levels have contributed to the erosion of the composite’s annual underwriting profit. The composite’s combined ratio reached 95% in 2015, its highest mark since 2005. Milliman’s Brad Parker and Eric Wunder provide some perspective in this article.
This article was originally published in the December 2015 issue of the Medical Liability Monitor.
Defense costs are the greatest expenditure for many medical professional liability (MPL) insurers. Employing big data analytics may help MPL insurers control their litigation expenses more effectively. Milliman consultant Chad Karls provides perspective in his article “Big data analytics: A practical application for MPL insurers.”
Here is an excerpt:
The new and rapidly advancing science of big data analytics offers MPL insurers the opportunity to absorb the massive amount of legal invoice data as it is being reported, take a deep dive into it, and – with the help of sophisticated algorithms – quickly derive valuable insights that can be used to better understand and manage the claims process.
The result is precise, actionable information that insurers can utilize to evaluate and manage their defense strategies – even as cases are progressing from discovery to depositions, from the expert witness prep phase to trial and beyond….
So, once this data has been properly prepared and constructed, an MPL insurer is in a position to investigate the efficacy of its claims-handing strategies. Rather than relying on just intuition and judgment, which are often biased by one’s outlier and/or most recent experiences, we can allow the data to inform our strategies. We can answer questions like these:
• Is it an effective strategy to file a motion for summary judgment (MSJ) in a particular venue or with a particular judge, given our historical success rate? How much does it cost to file an MSJ?
• What is the average cost of an expert deposition and are we taking more of them now, or has the average cost per deposition increased, or both?
• What is the optimal lag between preparing our defendant for his or her deposition and the deposition itself, if any?
• Do we tend to get a better outcome when the lead attorney’s hours represent at least X% of the total hours spent on the case?
• How much does it cost to have our defense firms comply with our 90-day claim summary report, and does the compliance rate correlate with the outcome of the claim?
• Can we develop a more cost-effective strategy for our record retrieval and court reporting costs?