Health & Life Insurance Actuaries | Lewis & Ellis Inc.

Medical malpractice insurance

Health Care Reform and Policy
by Glenn Tobleman
Medical malpractice insurance is necessary for all health care facilities.
Medical malpractice insurance is necessary for all health care facilities.

As a professional, you understand the importance of professional liability insurance as it pertains to the success of the organization. Medical malpractice coverage is a form of liability insurance that protects businesses from the liability that comes with a potential medical accident.

While this sector of the insurance industry is not new, the marketplace is changing in more ways than one. It's important to understand the value that medical malpractice insurance can bring to any healthcare establishment, from the perspective of the insurers.

Why medical malpractice insurance is necessary

Medical malpractice insurance is liability coverage that pertains to medical professionals such as physicians, surgeons or nurses. With this kind of insurance, medical professionals are protected from malpractice services that result in the harm or death of a patient.

When it comes to medical malpractice lawsuits, they are more common than you might think.

According to a study by the law firm Raynes Lawn, there are about 20,000 medical malpractice lawsuits per year. Not only does this make medical malpractice insurance necessary to function as a healthcare business, but it also protects the professional's career.

The importance of protecting your business from litigation and lawsuit from accidental malpractice cases should be clear at this point. But, it's not just something that's nice to have, it's required in some states. Here are the seven states that require at least medical professional liability insurance.

  1. Colorado.
  2. Connecticut.
  3. Kansas.
  4. Massachusetts.
  5. New Jersey.
  6. Rhode Island.
  7. Wisconsin.

In the other 43 states, it's technically legal to practice without medical malpractice insurance. However, many establishments require their doctors to obtain at least some form of coverage and will get medical liability coverage for the organization as a whole. There are also specific situations where the practicing medical professional is required to get the minimum amount of coverage, such as when a doctor is visiting another hospital to do work.

According to the American Medical Association, more than "65% of doctors over the age of 55 say they have been sued at least once." Recently, there has been a national focus on medical malpractice insurance reform to make insurance more accessible to those who need it the most.

What happens when the business or medical professional decides to continue without any sort of coverage or protection? The truth is that they could end up being liable for thousands of dollars to patients for damages. The business is vulnerable to risk, which could be extremely dangerous to the long-term success of the health care establishment.

Managing liability risk

With any kind of business, managing risks in all capacities and circumstances are especially valuable for those in the healthcare industry. This is because there is a large potential for an accident to happen, and the damages can be extremely costly. Medical malpractice insurance coverage is extremely important for those working in these fields and will help protect them from liability risk.

For people and businesses seeking malpractice coverage, there are many different options available that should be explained to the client thoroughly. Here are some of the things that are available through most insurers:

  • Attorney's fees and court expenses.
  • Settlement costs.
  • The cost of hiring an arbitrator.
  • Compensation.
  • Medical damages.

As the insurer, it's your responsibility to ensure the client is aware of all of their options so that they are accurately covered. For example, most coverage does not protect the entity from criminal acts like sexual misconduct. This opens the opportunity for additional risk, so a different kind of coverage may be necessary in this case.

Sometimes professionals decide to go without insurance in the states where this is legal. The reasons for this can be varied. It's important to know what the barriers for clients are when they approach potential coverage. For example, the cost of medical malpractice insurance coverage can be high due to the liability. The price tag varies depending on the specialty, location and claims limits.

For some locations, the insurance may be more expensive. As the policy provider, it's important to manage risk through reliable data collection and evaluation. This is why working with an actuary that understands the ins and outs of medical malpractice can be beneficial to understand what premium rates should be and what they may be in the future.

Just take one look at the COVID-19 pandemic, which shook up the insurance industry as a whole, including medical malpractice insurance costs.

Factors like medical professional shortages, lack of testing centers, overpopulated emergency, medical rooms and personal protective equipment all contributed to the increased risk for both the health care facility and the insurance provider. Even two years in, insurers are biding their time and preparing for potentially belated medical malpractice suits to roll in.

It's common for patients to sue the medical establishment years after the actual incident occurred. The risk associated with protecting the public in the circumstance of a global health crisis has changed the medical malpractice market.

Coverage options for medical malpractice insurance

Because the medical profession is so varied and there is a wide variety of practices, there are also different kinds of coverage that are available. Here are three main types of malpractice insurance that are most popular:

  1. Occurrence coverage: This type of policy offers coverage when a claim is made regardless of when the event in question actually occurred.
  2. Claims-Made coverage: For this option, the insurance manages incidents that only occurred during the time that the policy is active, regardless of when the claim is made.
  3. Tail coverage: For health care businesses, this type of coverage protects the insured even after the policy is over or expired.  It can provide additional protection if claims-made coverage is selected.

Every business in the medical industry should obtain at least the minimum amount of malpractice insurance. Those who have their own practice should obtain it themselves. When working for a larger hospital, the employer should obtain the coverage for the staff.

For the insurer, it's important to talk to the client and make sure that they are aware of their coverage options because there are so many specific types of coverage that rely on the circumstances. A general practitioner needs different coverage than a surgeon that owns their own practice, and it's your job to guide them to the best medical malpractice coverage choices.

Medical malpractice insurance in 2022

As is the case for most types of insurance, the marketplace is changing as external factors impact particular insurance sectors. This becomes clear because medical malpractice insurance premiums are increasing year over year. After the pandemic began, insurance companies were exposed to more risk, which in turn has increased the premium rate.

Due to this rise in costs, some medical professionals are cutting back on the amount of coverage that they obtain. However, it is more important than ever for health care providers to protect themselves from litigation and liability. This is why, as insurers, it's important to carefully evaluate the risk involved for all stakeholders, including both the policyholder and provider.

As we move into 2023, predictive technology is valuable for insurance providers to manage their risk exposure. To stay competitive in the medical malpractice insurance sector, work with professionals who have the ability to analyze data and make reliable suggestions for premium rates and coverage availability. Lewis & Ellis understands the shifting nature of the marketplace, from government policy implementation to reform changes.

Our professionals offer strategic planning such as:

  • Evaluating contract profitability.
  • Developing budget models for capitation.
  • Benchmarking your experience data.

This kind of assistance can set you apart from your competition and help you, as a policy provider, offer the most comprehensive medical malpractice insurance products. The medical malpractice insurance industry is constantly changing and requires insurers to partner with professionals who will boost the business to success.

If you are ready to get started, reach out to Lewis & Ellis today.

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