Health care reform "is going to change everything" for medical professional liability insurers–and not necessarily for the better, warns the top executive of one of the largest writers of the coverage in the United States.
"The collective imaginations in this room can't begin to understand how it's going to change every one of us personally and every one of us professionally," W. Stancil Starnes, chief executive officer of ProAssurance, said at the Keefe, Bruyette & Woods Insurance Conference early this month.
"The changes are going to be broad, they are going to be far-reaching, and they are going to be profound," added Mr. Starnes, whose ProAssurance is the largest independently traded writer of medical professional liability insurance, and the fourth-largest writer overall.
What is known is that the health care reform approved by Democrats in Congress, led by President Barack Obama, will mean more customers, since more insured patients entering the system will require more physicians and ancillary providers, noted Mr. Starnes. He said ProAssurance has evolved to meet those needs–acquiring businesses to write new classes on the rise, such as physician's assistants and licensed nurses.
Although the exact effect the health care reform law will have on the medical and legal environment is uncertain, Mr. Starnes said he is sure of one thing.
"The health care reform as it was passed in Washington will not reduce lawsuits by even one," he said, adding that there is nothing in the law to curb "America's appetite for the courtroom. Lawsuits will continue. It is limited health care and unlimited liability."
Adding 30 million people to the health care system without the appropriate number of primary care doctors to treat them is a recipe for frustration, and "that's one of the things that drives lawsuits against physicians," Mr. Starnes explained. "That and unexpected outcome are the drivers of frequency."
"If you dump that many people into the system, you can't snap your fingers and have the people to treat them. It isn't always easy right now to get in and see a doctor," agreed John Mize, consulting actuary at Towers Watson. "At least in the short term, physicians could be overburdened, which may lead to errors."
But there are also potential positive impacts from the new law, industry observers concede.
The reform law focuses on the primary care physician, giving doctors an increase in reimbursement rates and incentives for treating underserved areas of the country.
The idea is that more medical problems will be caught in more people quicker, while instituting means to achieve coordinated care, thereby reducing emergency room visits and improve outcomes, according to Mr. Mize.
Positive effects of health care reform possibly include more focus on favorable outcomes, which would increase the focus on risk management, Mr. Mize said.
As part of the plan, hospitals will be penalized for a large proportion of re-admissions. Over the long term, health care reform might prompt an earlier start of treatment, resulting in better outcomes and fewer claims, he added.
"Our job right now is to create discussions and educate," Mr. Mize said. "There are not a lot of details right now about how this all will be implemented–there isn't a lot of flesh on the bones. This is evolving. We're learning a little bit more about it each day."
The impact will be felt over time, said Paul Fields, vice president of underwriting for Odyssey Re, speaking at a recent seminar hosted by the Casualty Actuarial Society.
"As the programs are further developed, we'll learn more about the benefits," Mr. Fields said.
Mr. Starnes of ProAssurance said claim frequency and severity are down. Mr. Mize said hospitals began focusing more on loss prevention when medical malpractice costs increased about a decade ago. Additionally, plaintiffs' attorneys became more selective about cases due to high litigation costs.
That is just the news Mr. Starnes wants to hear. The executive said he'd "rather pay $50,000 to defend than to settle for $5,000." He does not rule out a settlement when it is warranted, but to settle in order to avoid litigation costs "runs counter to our DNA," he said.
Still, no one knows exactly why frequency is down, according to Mr. Starnes. Tort reform does not play a role, as frequency has fallen in states with or without it. (For more on tort reform and medical liability, see the accompanying story on page 12.)
Mr. Starnes warned, however, that "history repeats itself and [frequency] will go back up." He said he thinks recent declines have less to do with tort reform and more to do with plaintiff's lawyers' behavior.
A new study could also have shed some light on misperceptions regarding malpractice claims. Although such claims were thought to be numerous, a report by the Harvard School of Public Health points out that only about 1.5 percent of patients harmed by medical treatment actually filed malpractice claims, and the medical malpractice system accounts for just 2.4 percent of health care spending.
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