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 a recent insurance conference for actuaries in New York.
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, and gave their forecast at the Casualty Actuarial Society’s Seminar on Reinsurance.
Through early April, seven to eight million people had signed up for health care through insurance exchanges, noted Elke Kirsten-Brauer, executive vice president and chief underwriting officer of MGIS, a leading 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 health care system.
“These are people who have never gone through the system,” she said. “We need to educate them.”
Absent any help understanding the system, Kirsten-Brauer predicted, patients will be more likely to sue.
The rise of the “accountable care organization”
Another important trend: The doctor-patient relationship is becoming diluted. The old model of a single doctor diagnosing a patient’s problem, 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 other 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 are part of an accountable care organization, often referred to by the acronym ACO.
Thanks in large part to 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, said Brian Ingle, an executive vice president at Willis Re and Fellow of the Casualty Actuarial Society, leaving insurers to compete harder for malpractice premiums.
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.
Aging population means higher med mal exposures
While the ACA plays out, important demographic trends also will affect medical malpractice:
• Americans are aging, as the baby boom generation reaches retirement age. Older patients often have more complaints, which translates into more care needs in an already overburdened system and an ever growing provider shortage
• Physicians are getting older, too, and want to enjoy a better work-life balance, moving down from a 60-hour work week to 45 or so.
• Americans are getting heavier, leading to more cases of diabetes and more joint ailments like bad knees and hips.
All of these trends portend higher med mal exposures, Bingham pointed out.
Taken together, the changes mean risk management is more important than ever, Kirsten-Brauer said. Insurers need to use data to promote quality and patient safety and satisfaction. They must adjust their knowledge of the past to meet the exposures of the future.
“We need to train our underwriters and actuaries,” she said, “to challenge them to look at the actual risk exposure” and not just rely on the tools of the past. We have to listen to our insureds to meet our challenges.”
Currently celebrating its 100th year, the Casualty Actuarial Society fulfills its mission to advance actuarial science through a singular focus on research and education for property/casualty actuarial practice. Among its 6,200 members are experts in property-casualty insurance, reinsurance, finance, risk management, and enterprise risk management.
