Impact of Recent Trends on Medical Professional Liability Captives. Timothy C. Mosler, FCAS, MAAA

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Bertha Burns
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1 Impact of Recent Trends on Medical Professional Liability Captives Timothy C. Mosler, FCAS, MAAA June 11, 2014

2 Disclaimer Throughout our presentation, we will discuss the potential impacts of the Affordable Care Act (ACA). It is not possible to identify all of the changes that t will affect insurance costs or to predict with certainty the impact of any of the changes. The uncertainty is further increased because we are in the initial implementation phases of ACA. Ultimate long term impacts will depend on many factors including the actions of claimants, lawyers, insurers, regulators and health care providers. 1

of any of the changes. The uncertainty is further increased because we are in the initial implementation phases of ACA.

3 Agenda ACA Key Provisions ACA Industry Responses ACO Growth Fewer Independent Physicians Medical Professional Liability (MPL) Captives Coverage Impacts Loss Cost Impacts 2

4 ACA Key Provisions (for MPL) Access to affordable health insurance Federal subsidies for the poor No pre existing condition exclusion Essential health benefits Individual mandate Out of pocket maximums, removal ofpolicy limits Limits on rating factors Financial results tied to cost containment while achieving quality outcomes Focus on prevention and wellness Medicare reimbursement adjustments Published quality ratings per plan ACO model EHRs Largerrole role ofgovernment in healthcare 3

rating factors Financial results tied to cost containment while achieving quality outcomes Focus on prevention and

5 ACA Industry Responses Busier doctors More patients More administration Recognition of scale advantages Control of quality Revenue advantages Smaller administrative load Increasing number of physicians employed by hospitals Decrease in solo practitioners Increased use of health care extenders Growth in ACOs 4

administrative load Increasing number of physicians employed by hospitals

6 Number of ACOs has Tripled Since Q Total Physician Group Hospital System Insurer Community Based 0 Source: Health Affairs Blog ( 5

7 Increasing Number of Physicians / Declining Independence 900 Amounts in Thousands Total Independent Source: Accenture 6

683 793 757 600 500 389 400 354 326 262 300 200 100

8 MPL Captives Coverage Impacts New captives as a result of Larger health systems Increased cost pressures Existing captives grow larger Decline in number as entities merge Increase in size as surviving captive takes on new exposures Potentially higher exposed self retained limits 7

Decline in number as entities merge Increase in size as surviving

9 MPL Captives Coverage Impacts New exposures for hospital captives: Employed physician liability, also Potentially increased vicarious liability Potentially larger hospital claims Managed care liability Health care extender liability (primarily exposure growth) Tail coverage for previously independent physicians Cyber liability Increases in employment practices liability 8

Managed care liability Health care extender liability (primarily exposure growth) Tail

10 MPL Captives Loss Cost Impacts Each of these trends could cause small to moderate changes in MPL costs Busier doctors may be forced to spend less time per patient which could lead to an increased incidence of medical errors Health care extenders Pricing uncertainty (supervised vs unsupervised) More extenders could lead to more failure to supervise claims Greater coordination of defense among defendants with a common employer could reduce MPL costs 9

Health care extenders Pricing uncertainty (supervised vs unsupervised) More extenders could lead to more failure

11 MPL Captives Loss Cost Impacts Each of these trends could cause small to moderate changes in MPL costs. The direction of the change is unclear. Differences in claim settlement practices between commercial coverage and hospital self insurance programs EHRs Could affect multiple events in a claim s progression Bad outcome for a patient Filing a claim Finding of negligence Awarding damages Patient Centered Outcomes Research Institute (PCORI) Created to perform comparative effectiveness research Expected to identify most effective treatments Could reduce the frequency of bad outcomes Could lead to more claims if it s perceived as the reasonable standard of care Same issue when ACO s establish a standard for care 10

for a patient Filing a claim Finding of negligence Awarding damages Patient Centered Outcomes Research Institute (PCORI) Created to perform comparative effectiveness research

12 MPL Captives Loss Cost Impacts An extreme scenario for any of these trends could lead to significant changes in MPL costs Higher costs Possibly diminished relationship between patients and their doctors could affect jury attitudes during MPL trials Coordinated standards of care within health systems could lead to large multi claim actions Lower costs Greater access to healthcare and the focus on quality could lead to a significant reduction in bad outcomes for patients Technology advances in health care could facilitate prevention and patient safety Cellphones/Internet Sensor Data 11

health systems could lead to large multi claim actions Lower costs Greater access to healthcare and the focus on quality could lead to a

13 Thank You for Your Attention Timothy C. Mosler, FCAS, MAAA

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