E&O Insurers Uneasy About Managed Care
The combination of uncertainty over the future of the Patients Rights Bill and declining capacity for managed care professional liability insurance illustrates a system on the road to crisis, underwriting executives say.
"We, in managed care, are already punch drunk and staggering. And now they hit us with a patients rights bill," remarked Kimber Lantry, director of programs for TIG Specialty Insurance Services headquartered in Irving, Texas. "Is there any wonder there is a crisis in manage care liability?" he asked.
Two versions of the patients bill of rights have passed Congress, and the House and Senate have yet to meet in conference to iron out what executives say are notable differences in the two bills.
Since the Sept. 11 terrorist attack, the whole issue has been pretty much put on the back burner as the countrys representatives deal with other pressing issues, the executives point out.
With the uncertainty, the mood among company representatives remains grim, if not apocalyptic, over the future of managed care organizations and the ability of executives to obtain professional liability coverage.
A major concern is the increasing amount of litigation over decisions made by MCOs. Even if a judge decides to throw the case out of court or there is a finding in favor of the MCO, thousands of dollars are being spent to defend the cases–and the list of suits appears to be growing, underwriters say.
Such a context makes underwriters uneasy, and in a market where few carriers are writing errors and omissions policies, even fewer want to venture into the morass that the nations health care system seems to be growing into.
"The tsunami I predicted in managed care has come to fruition," remarked Susan Huntington, vice president, health care for Chubb Executive Risk, a subsidiary of Warren, N.J. based Chubb.
MCOs are being blamed for all the ills facing the U.S. health care system, observed Ms. Huntington, and as the frequency of litigation increases, the institution is increasingly feeling under siege. Employers, she noted, are feeling unhappy with the state of affairs, as health care premiums rise this year from anywhere between 11 and 20 percent.
"The industry has become the punching bag of the day," said Ms. Huntington.
Under the current circumstances, capacity is decreasing, and some of the few [insurers] who remain are "reticent" in their underwriting, Ms. Huntington observed. The situation is forcing clients to take on higher deductibles, anywhere from $25,000 to $1 million, she noted.
One remedy, admitted Mr. Lantry, would be to iron out the differences in the bills in Washington so insurers know where the issue stands.
"Insurers do not deal with uncertainty–and the uncertainty right now is the future of managed care," Mr. Lantry said.
In addition to the MCOs themselves, employers offering health care benefits through managed care plans have also faced a rising tide of lawsuits in recent years. One protection being bandied about for employers in the Congressional patients rights bills is a designated decision maker proposal.
The designated decision maker provision is designed to protect companies from liability by detaching the company from the health care decision making process (NU, Oct. 1, page 16).
One problem noted by attorneys, at least with the Senate version of the bill, is that attorneys can drag employers into litigation, even if legislation says an employer has no liability. Suits could be brought to determine if there was a legitimate exercise of the right to appoint the DDM or an attempt to shirk its responsibility in the process.
While insurers may not yet be drafting DDM professional liability policies, which designated decision makers would be required to have under the language of the bills, Chubb has had an insurance plan in place to protect employers from managed care claims for several years. That insurance solution is called Plan Purchaser Protection, Ms. Huntington said.
Plan Purchaser Protection is available on a stand-alone basis for employers actively involved in the administration of managed care plans or by endorsement to a fiduciary liability policy for other employers. (See NU, May 8, 2000, page 10)
How much protection companies will ultimately be afforded under such insurance policies remains to be seen, as the protections they used to have under the 1974 Employee Retirement Income Security Act are chipped away by the legal system.
"Our exposures are changing as we speak," Ms. Huntington said. "The courts continue to be creative in changing the rules and all of us underwriters are fully aware of what is happening and concerned that the rules are changing."
On the MCO front, ten states now allow for MCOs to be sued for malpractice, despite the lack of a federal patients' rights bill, Ms. Huntington pointed out.
Attorneys are also taking on the same tactics used successfully in the cigarette litigation cases–with medical providers, state attorneys general and aggrieved parties filing lawsuits and looking for big settlements, Mr. Laundry noted.
Where it will end, ultimately, may be with tort reform, Ms. Huntington said. Otherwise no professional liability provider will be able to stay in the markets.
"Ive been in this for 25 years and it feels very much like the medical malpractice [crisis] of the 70s and early 80s," Ms. Huntington suggested. "This is very much the beginning for managed care organizations."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 12, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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