Those of us “veterans” who have worked in the health care professional liability industry have experienced many market cycles since the mid-1970s. If you are a claims manager, you wonder when the next wave of suits will occur and if you are an underwriter, you wonder when the next market turn will occur.
We are currently in one of the most sustained periods ever for Health Care Professional Liability (HPL) market stability. HPL is the most profitable line of P&C insurance with the best combined ratio of all (well under 100 the past five years). There are no signs whatever of a dramatic turnaround, yet one can invariably detect an air of pessimism among many in the industry: underwriters and brokers, namely:
- Things are just too good to be true
- The market cycle will eventually bite us, as it always does
- Health care reform means a wave of claims is coming
Let’s examine these assumptions, one-by-one:
Things are just too good to be true!
Really? They are? Or are they the result of determined and successful lobbying for effective malpractice reforms? Doesn’t patient safety and improved risk management come into play and if so, what will change that? Less reimbursement?
The market cycle will eventually bite us, as it always does
It hasn’t yet…and things really began to turn around for the better beginning in 2003. There are absolutely no signs of a market turnaround or a worsening of the national environment despite states (NY, NJ, FL, PA, and IL) where huge verdicts are still occasionally possible.
Far fewer patients walk into plaintiff’s lawyers’ offices today. And the economic downturn has had no effect whatsoever on claim frequency and severity. At a time when many are desperate for money, patients are not running to the courts. Large verdicts ($5M+) comprise a small fraction of one percent of all cases.
We are winning the battle for public opinion. What would cause all this to change rapidly for the worse? I’m stumped… but wait…
Health care reform means a wave of claims is coming
Over 32 million uninsured that will get coverage under the Affordable Care Act (if upheld by the Supremes) will then show up at the doors of many providers, especially doctors and hospitals.
Where are those people now? They are already in the system and when they do come in today, they are sicker and more difficult to treat.
Some believe that more patient encounters means more claims.
But what if reform brings:
- Fewer adverse events with improved technologies such as imaging and the electronic medical record, etc.?
- Fewer hospitalizations with less acutely ill people treated in a more coordinated health care delivery system?
Patients often sue because they cannot afford care. The graver the injury, the more likely they stand to lose health insurance coverage and income. If they have health insurance, that removes a huge motive to sue.
Pssssssttt! The sky isn’t falling…