NU Online News Service, Nov. 29, 3:52 p.m. EST
Medical professional liability insurers need to develop new capabilities to be profitable in a field that will experience several changes in the wake of health care reform, according to a new Conning Research study.
In a new study titled “Medical Professional Liability in a Changing Health Care Environment: The New Story Unfolds,” Conning noted that medical professional liability is a highly cyclical property and casualty segment, and although the last 10 years have been “nothing short of a remarkable return to profitability,” the past two years and into this year have seen rate declines and lower reported premium.
Although the cycles are constant, the reasons behind them are not, Conning noted. The recent years of profitability, Conning explained, were due to factors such as tort reform measures, better risk management and aggressive claims defense.
For the new cycle, profitability will be challenged by some aspects of health care reform, the financial condition of hospitals and the rollback of tort reform in some states.
Speaking to tort reform, Conning said the benefits of non-economic damage caps in some states are well-established. But the report pointed to reversals of reform measures in several states, “the tone of courts” and federally funded research for alternatives to the tort reform measures as factors that should concern insurers.
Conning said insurers should not underestimate what even subtle changes in case law can do to loss costs on a regional basis.
Conning also said health care reform goals to make care available and affordable for more people could begin to impact the quality of care and affect the loss profile of medical liability insurers. One way is through physician shortages, which Conning said are expected to deepen under the reforms.
The mandated use of interoperable electronic medical records (EMR) also brings risks, Conning said. EMR will likely have long-term benefits, Conning noted, but in the short term, as the systems are implemented, errors may occur. “Current research shows that less than 10 percent of hospital and physician groups have compliant EMR systems in place,” Conning said.
Insurers will need to add value to insureds by assisting them with the landscape changes. For example, Conning said insurers could assist clients with EMR by helping them test the new systems.
Insurers should also take measures such as questioning and monitoring quality and standards of care, monitoring hospital financials, understanding the risks of the increased amount of insureds under health care reform, and managing investments to mitigate the risk of inflation.