The current upward trajectory of medical professional liability rates, the likes of which hasn’t been seen since the mid-2000s is expected to continue through this year and into 2022, according to an American Medical Association Policy Research Perspective report.
This rise in rates, after a mostly stable decade, should come as no surprise to hospitals as they shoulder greater risks related to high-awards claims, COVID-19 issues, pricing transparency challenges and “our country’s lottery ticket mentality,” when it comes to lawsuits, said Shep Tapasak, senior vice president for specialty underwriting at ProAssurance.
“We have been seeing rate increases in the hospital professional liability space for about 18 months,” Tapasak said. “I would not say we’re in a hard-market cycle yet, but it’s firming up after a prolonged soft market of seven or eight years, during which insurers and hospitals benefited from favorable loss development on older accident years.”
Now, he said, we’re seeing modest to substantial increases depending on the account’s losses and other exposures, noting that most increases will be modest and unlike those seen in the 2002-2007 timeframe.
“Insurers are looking to achieve rate increases where it makes and sense and to offer excess limits premiums judiciously,” Tapasak said. “We often need to balance top line issues with the need for rate adequacy, as sustainability is key. It’s about having a disciplined approach.”
Discipline in the face of uncertainty, one might add, as COVID-related claims are “still in the early innings” and the impact of hospital transparency pricing regulations are unknown.
Regarding the latter, Tapasak said greater transparency can lead to confusion, aggravation and potential claims stemming from unanticipated ancillary charges associated with certain procedures that may not be understood by the consumer reviewing the hospital’s public pricing information, a Centers for Medicare and Medicaid requirement as of Jan. 1.
“In such cases, the perceived lack of effective communication within a healthcare setting could lead to claims,” Tapasak said.
When it comes to COVID-19, he said claims could involve such incidents as front-line worker being seen not wearing protective gear, putting patients at risk, or complications stemming from being turned away from a hospital operating at capacity. Meanwhile, juries could be swayed by the halo effect and the goodwill afforded healthcare workers during the pandemic, though Tapasak points out that people can have short memories.
Finally, he said, “social inflation” continues to drive up the awards for high-profile claims, such as sexual abuse and brain-damaged babies.
It’s no wonder that carriers have exited the HPL. For those that remain, dedication to the space is paramount, said Tapasak. “For our organization, having grown up in the healthcare space, it’s in our DNA.”
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