Filed Under:Risk, Captives

Medical Malpractice’s Pair of Pain Points

A shrinking pool of clients and the rise of “super losses” ail the Med Mal space

Two trends are making Medical Malpractice insurers feel ill.

One malady is the continued rise in large jury awards for malpractice. In March, Bermuda-based specialty insurer Hiscox announced that the severity of so-called “super losses” in Med Mal cases—more than $50 million per award—is on the rise, despite industry-wide measures to quell litigious actions.

From March 2010 through February 2012, seven medical-liability awards collectively cost the Med Mal industry well over a billion dollars in damages, Hiscox reported.

Such huge awards are continuing and perhaps even getting worse, says Ian Thompson, Hiscox’s senior vice president of health care.

“Juries are willing to punish health-care providers in a way that they haven’t in the past,” Thompson says. “It’s something to be watched.”

The other source of acute discomfort for Medical Malpractice insurers: a shrinking pool of insureds.

In advance of the implementation of the Patient Protection and Affordable Care Act (PPACA), doctors are selling off their private practices to hospitals to offload increasing overhead costs and benefit from the hospital’s Med Mal coverage.

“They’re selling their practices to hospitals because they simply can’t afford to stay in practice on their own any longer,” says Maury Magids, CEO of Capson Physicians Insurance of Austin, Texas. “They’re pooling resources with a larger number of doctors.”

And most hospitals have self-insured trusts or offshore captives for their Med Mal coverage and therefore do not buy insurance through standard carriers, Magids notes.

Scott Palde, senior account manager at Med Mal broker Cornerstone Professional Liability Consultants of Radnor, Pa., tells NU he’s already seeing consolidation moves across the health-care industry. “Hospitals are buying physician practices or employing doctors,” he notes.

All of this consolidation has created fewer buyers of Med Mal insurance in the traditional markets, Palde says, although it does mean physicians and physician groups are needing to purchase Extended Reporting Policies.

RATES & CAPACITY

With the client pool shrinking, few new carriers are eager to enter the segment—and those already in it are fighting for market share.

Carriers, Thompson says, “don’t want to lose what they’ve got; they want to retain margins.”

According to Palde, some carriers are trying aggressive tactics to grow their base. “Carriers are offering quotes even for physicians with above-average loss experience,” he says. “We have had one carrier increase rates—but offset with additional credits where necessary to retain [client] business.”

Magids adds that the lack of new available clients is “forcing [carriers] to give some deep, deep discounts” to their existing clients.

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