Obamacare Raises the Stakes for Medical Malpractice Carriers

With millions of newly insured patients expected to fill up the waiting rooms of doctors’ offices as healthcare reform is implemented, medical malpractice insurers may have reason for concern about the law’s impact on liability trends.

The catalyst for increased utilization is the controversial mandate included in the Patient Protection and Affordable Care Act (PPACA)—better known as “Obamacare”—requiring all individuals to have health insurance starting in 2014, or pay a penalty via their federal income tax form. Subsidies will be made available to help those with affordability issues, and Medicaid is being expanded in most states as well.

In my blog of Oct. 2, I examined the possible spillover effect of the law on workers’ compensation, due to concerns about possible delays in delivery of medical care. But there are potentially game-changing implications for professional liability carriers as well, both positive and negative.

Optimists will point out that, thanks to Obamacare, there will be a greater emphasis on preventative care, which should mean better outcomes and fewer dissatisfied patients tempted to blame the doctor for their ailments and sue for damages.

Indeed, helping those currently without insurance to get coverage should prompt more people to set up regular checkups, address minor ailments before they become major ones, and seek treatment for chronic medical conditions when in the past they might not have been able to afford to do so. To drive home the point of being more proactive, the law offers incentives for employers to form wellness programs and for employees to participate in them.

In addition, PPACA provides research funds to study the comparative effectiveness of various treatment options. Medical malpractice insurers could benefit if the insights gained from such studies actually improve patient care, resulting in lower claims frequency and severity. Therefore, they should consider providing data to help those studying treatment options establish best practices.

PPACA also includes incentives for providers to computerize medical records. Having an automated system in place might improve patient care—for example, by more reliably red-flagging a prescription for a drug that would induce an allergic reaction in a particular patient.  Keeping records online might also lead to more effective coordination of care among providers, again producing better outcomes and thus avoiding malpractice claims. (There is also a potential cross-selling opportunity to offer cyber-liability coverage to practitioners who are computerizing their paper records for the first time.)

That’s all for the good, but pessimists have reasons for concern.

For one, if a horde of new patients end up storming medical offices waving freshly-minted insurance cards, overwhelming an already shrinking primary care community, doctors might spend less time on each case and rush through exams. Many currently insured patients might have to wait longer to see a doctor or get a diagnostic test. The result could be more frequent mistakes, delays in care, and worse outcomes, possibly prompting additional medical malpractice suits.

Another element to consider is the likelihood that increased demand for medical care will accelerate the use of physician assistants, nurse practitioners and telemedicine to cope with the overflow. In my Oct. 2 blog, I credited this as a positive factor for time-sensitive workers’ comp carriers, in that the additional manpower might help alleviate delays in seeing patients.

But the flip side of this coin is the possibly negative impact on medical malpractice claims frequency if critical symptoms are overlooked or misread by less-qualified providers or by doctors examining patients virtually.

Computerization of records and studies into more effective standards of care may also create problems. Mistakes in data input—perhaps inevitable given the large influx of new patients to be processed and old records to be converted—could increase treatment errors, while providing plaintiff lawyers with a rich source of malpractice evidence. And doctors who stray from any newly established best practice, no matter what the justification, could find themselves more vulnerable legally.

These risks may still be theoretical. But med mal insurers would still be wise to run worst-case scenarios through their predictive models to project how the stress put on the healthcare system as a result of the new law might be factored into underwriting, pricing and claims systems. They also need to pay close attention to frequency and severity trends as Obamacare is fully implemented over the next couple of years.

A new healthcare world is emerging, and malpractice insurers are going to have to figure out a way to profitably live in it.

About the Author
Sam J. Friedman

Sam J. Friedman

Sam J. Friedman (samfriedman@deloitte.com) is the research team leader at Deloitte’s Center for Financial Services in New York. For many years, he was the Editor in Chief of National Underwriter’s P&C edition. Follow Sam on Twitter at @SamOnInsurance, as well as on LinkedIn.




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