Administrative concerns such as hiring a strong clinical team, choosing the right EHR practice management system, and maintaining the appropriate levels of insurance for the practice are important considerations for the independent physician. With healthcare costs rising across the board, a recent survey found that malpractice insurance rates are also increasing.
Medical Group Management Association’s (MGMA’s) most recent survey of healthcare leaders found that 62% of those participating said their malpractice insurance rates had increased. Of those:
- 28.9% said the increase was less than 10%
- 47.8% responded that the increase was between 10% and 19%
- 15.6% noted the increase ranged from 20% to 29%
- 7.8% stated the increase was 30% or more.
According to other surveys, certain specialties experienced a larger increase, as did certain geographic locations. For example, the Medscape Malpractice Report 2021 revealed that the percentage of physicians by specialty who have been named in a malpractice lawsuit included:
- Plastic surgery (83%)
- Surgery, general (83%)
- Orthopedics (81%)
- Urology (80%)
- OB/GYN (79%).
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On the geographic side, an American Medical Association (AMA) report found that 12 states’ premiums increased 10% or more over the previous year. The top five were:
- Illinois (58.9%)
- West Virginia (41.7%)
- Missouri (29.6%)
- Oregon (20.0%)
- South Carolina (16.7%).
The AMA analysis indicates that this could be the beginning of a trend, similar to that which physicians experienced in the early 2000s. Although it appears as though COVID-19 did not have an immediate effect on malpractice insurance premiums, it’s uncertain yet as to its long-term implications.
There has been a backlog of cases that were delayed by the pandemic so with the anticipation of additional claims with care volume increasing, physicians are finding that they are paying higher premiums. Award amounts are also trending higher.
The current environment is being referred to as a “hard market,” that is a liability crisis occurring as a result of a market upswing which then increases premiums while also reducing the capacity for most types of insurance. These types of increases have occurred in the past. In 2003, 77.4% of physicians experienced premium increases and in 2004 the number was 82.1%. The AMA indicates that there are signs that healthcare is in another hard market, including:
- Deteriorating underwriting results, a measure of profit for insurance companies. Insurers are often tempted to offset any losses they may experience by raising premiums. This can happen when it becomes more expensive for insurers to settle malpractice claims, or the number of claims increases.
- Lower loss reserve margins. Loss reserves are estimates that insurers make on the amount they will need to pay on future claims over and above what’s expected. When they set the loss reserve too low, and actual claims are greater than anticipated, insurer profits may take a hit, prompting them to raise premiums.
- Lower returns on investment. Insurers aren’t making as much profit off policies as they used to, so they need to raise their rates to offset the lower profits.
One option for independent physicians seeking to lower their malpractice insurance premiums is to check with their carriers to see if they offer discounts or rebates for completing courses or reviewing educational materials on risk management.