HJBR Mar/Apr 2020

Q&A 18 MAR / APR 2020 I  HEALTHCARE JOURNAL OF BATON ROUGE   How is medical professional liability insurance made available to physicians, healthcare providers, and hospitals in Louisiana? Members of themedical community have options when it comes to purchasing pro- fessional liability insurance. Policies are available from mutual companies (owned by policyholders) and commercial insur- ance companies (owned by stockholders), as well as alternative risk sharing entities (insurance trusts, risk retention groups, and captives), or they can self-insure. There are benefits and risks associated with each, and the nature of regulatory oversight, if any, varies. Typically, the first $100,000 of coverage, referred to as the primary layer, is purchased fromor provided by one of these entities. Coverage above $100,000 up to the statutory damages limit of $500,000 and unlimited medical expenses of the injured patient is obtained by paying a surcharge (premium) to the Louisiana Patient’s Com- pensation Fund (PCF). What is the state of the medical malpractice insurance industry in Louisiana? On a national level, the market is hard- ening as carriers increase rates and begin to restrict coverage due to increases in fre- quency (number of claims) and severity (cost of claims). While there have been unprec- edented changes over the last decade in the way healthcare is delivered, fortunately, the Louisianamedical professional liability sys- tem has been relatively stable. In Louisiana, the increase in severity has not been due to the “shock” verdicts expe- rienced in other states. Rather, the increase is primarily the result of the costs of ongo- ingmedical care provided for patients under the LouisianaMedical MalpracticeAct. Fre- quency is significantly higher here than the national average, partly because of the ease of filing a claim in our state. The Louisiana Medical Malpractice Act established in 1975 has been upheld as con- stitutional several times by the Louisiana Supreme Court. The Louisiana malpractice legal system is quite complex. While the act caps damages at $500,000, it does not cap themedical costs associated with the care of an injured patient, as it allows for unlimited medical cost recovery, even medical costs incurred in the future. While no state has a perfect liability system, the act has been effective in providing for the needs of injured patients, and positively impacts access to healthcare by ensuring the availability of affordable malpractice insurance. Last year, two carriers were forced to cease selling med-mal insurance due to solvency issues. How did that impact Louisiana physicians and healthcare providers? These insurance entity failures left physi- cians and healthcare providers in the diffi- cult position of having to quickly find cov- erage elsewhere for their own protection, and to meet requirements such as creden- tialing to obtain privileges at hospitals and facilities. Fortunately, LAMMICO’s financial strength allowed our company to respond to the needs of many of these healthcare pro- viders so that they have coverage for future claims. Those insured by these entities face uncertainty regarding coverage of claims that arose during their time as insureds with the insolvent companies, as well as the pos- sibility of financial assessments tomeet the obligations of one of the failed entities. What should physicians, hospitals, and other healthcare providers look for in a med-mal insurance carrier, especially in light of these failures? Look for an insurance company or entity that has rigorous regulatory oversight by a department of insurance. Insurance depart- ments typically approve rates and insurance policy forms, and perform financial and market conduct examinations. Also, insur- ers must submit their quarterly and annual financial statements to the regulators. Another consideration is whether the entity has a strong financial strength rating fromAM Best rating agency. Carriers rated highly by AM Best generally have a con- servative loss reserving philosophy, con- sistently favorable operating performance, and high policyholder retention, which is an indicator of policyholder satisfaction. Purchasers should understandwhether or not the policy they are considering is assess- able, which means they can be required to pay additional amounts to the insurance “On a national level, the market is hardening as carriers increase rates and begin to restrict coverage due to increases in frequency (number of claims) and severity (cost of claims).”