How Healthcare Reform Is Challenging Medical Malpractice

Though the impact of the Affordable Care Act (ACA) on medical malpractice insurance remains a bit of a puzzle, three insurance experts pieced together likely effects at an insurance conference for actuaries in late May.

Forecasting a coherent future from sparse data can be difficult, but it’s a skill casualty actuaries have gained through years of experience. There aren’t a lot of data yet – and the facts that do exist are subject to more political spin than usual. Still, two casualty actuaries and a veteran medical malpractice underwriter were able to use demographic and health industry trends to predict how the medical malpractice world could change over the next decade.

They gave their forecasts at the Casualty Actuarial Society’s Seminar on Reinsurance in New York, in a session titled “The Impact of the Affordable Care Act on Medical Professional Liability – an Update.”

Through early April, seven to eight million people had signed up for healthcare insurance through exchanges, noted Elke Kirsten-Brauer, executive vice president and chief underwriting officer of MGIS, a national insurance program manager for medical professionals. She said about one-fourth did not have insurance before; within a few years, more than 22 million people will gain health insurance.

The mere presence of more insureds will increase the number of medical malpractice claims, Kirsten-Brauer said. Compounding the issue is the fact that they are largely unfamiliar with the healthcare system. “We need to educate them” on matters that will seem trivial, she said.

Another important trend: The doctor-patient relationship is becoming diluted. The old model of a single doctor diagnosing a patient’s problem and then participating heavily at every step of treatment is giving way to expanded-care teams.

This is best seen with a new sort of doctor: the hospitalist. As casualty actuary Kevin Bingham of Deloitte Consulting explained, the term was coined in 1996 and is just now coming into vogue. These are doctors who monitor the hospital stays of patients — a job that the patients’ physician would have taken on in the past.

The hospitalist is part of the new paradigm, with some parts looking familiar but others less so. The physician still diagnoses outside the hospital; the surgeon still operates. But nurses are taking on larger roles in the doctor’s office, and the hospitalist picks up medical center duties. The physician re-enters for out-of-hospital follow-up.

Under this new model, patients are far less likely to be treated by a single professional. The series of professionals they move through is part of an accountable care organization, or ACO.

Thanks in large part to the Affordable Care Act, ACOs are growing rapidly. Hospitals are buying small physician practices countrywide, hiring the doctors and nurses, and blending them all into ACOs.

The new model bears a new set of risks for medical malpractice insurers, Bingham said. There is no continuity of care, as patients are handed off from professional to professional. They lose the personal connection to the medical community. “That’s how most med mal claims start,” Bingham said, “with a loss of connection with the patient.”

On the other hand, as hospitals buy up practices, the market for med mal for physicians shrinks. The exposure shifts to the hospitals that employ them.

Hospitals, being much larger than a physicians’ practice, will absorb more of that risk, leaving insurers to compete harder for malpractice premiums, said Brian Ingle, an executive vice president at Willis Re and Fellow of the Casualty Actuarial Society.

Meanwhile, the ACO will standardize treatment methods. Usually the standardized method will be sound. Occasionally, Ingle noted, it will not be. Responsibility could trace back to the deep-pocketed hospital. Suddenly, med mal insurers could be facing a mass tort — at an extreme, the “next asbestos” the property/casualty industry dreads.

In response, Ingle said, insurers are considering expanding their medical malpractice coverage to handle exposures usually left to errors and omissions or directors and officers policies.

While the ACA plays out, important demographic trends also will affect medical malpractice.

All of these trends portend higher med mal exposures, Bingham pointed out.