Medical malpractice is professional negligence by act or omission by a health care provider. The treatment provided falls below the accepted standard of practice in the medical community and causes injury or death to the patient.
The Need for Purchasing Insurance:
Physicians are very aware of the need for buying medical malpractice insurance. They are less familiar with many of the details. The insurance business is complex. As a result few physicians understand the vocabulary. Medical practitioners must have professional liability insurance. This protects their assets and careers.
Insurance is big business. Billions of dollars are spent annually. Although this is a small part of the almost $300 billion in total U. S. tort litigation costs, it is equal to about 3% of total health care costs.
Medical professional liability insurance (MPLI) is bought to protect a physician or health care institution. The physician is therefore protected from the results of a patient’s claim for negligence. Medical malpractice insurance is purchased through an agreement called the policy.
The insurance company agrees to financial responsibility. As a result the agreement covers legal fees and payment of claims against the physician. There is a fixed maximum dollar amount of coverage (liability limit). However only for a specified length of time.
The policy specifies certain excluded coverage. This condition lists actions not covered by medical malpractice insurance, i. e. intentional misconduct – acts that fall outside of the actual practice of medicine.
Insurance companies want to insure as many physicians as possible therefore they spread the risk. The premiums are based on considerations of numerous issues. For instance physician speciality and practice patterns. Also to be considered are past claims history and geographical location. Insurers consider “experience ratings”. A history of medical malpractice claims will result in higher premiums.
Premiums are calculated using complex formulations. Dollars however have to be set aside in reserves and costs of business. Further considerations are desired financial margins and any returns on invested premium dollars. Insurers believe a predictor of future claims is a history of past claims. Premium dollars are thus invested in order to generate additional reserve dollars and maximise investment income.
Insurers also buy insurance, called reinsurance. Reinsurance is thus a sharing of loss between insurers. A primary insurer assigns part of its total loss exposure to the reinsurer. In a world filled with risks and unpredictable jury awards, secondary insurers are thus hard to find. If available, rates are high, requiring primary insurers to collect more in premium dollars to bolster reserves.
Prior to the 1970s, medical malpractice insurance was entirely provided through occurrence policies. Occurrence policies cover all claims that arise from incidents that take place during a given policy period.
Claims Made policies:
There is a new insurance product referred to as “claims made”. Claims made policies allow insurers to more accurately adjust premiums. They reserve dollars based on trends and projections in various markets and business lines.
Claims have to be asserted against a physician before the end of the insurer-insured relationship. The incident being reported must have occurred after the physician first purchased a policy. The policy typically does not cover “prior acts”.
The physician and the insurer have a right to non-renew or cancel a policy. Therefore appropriate notice has to be given. This notice is typically 90 days. Insurance companies must act in good faith and have a “cause”. Some reasons for cancelling a policy include false or fraudulent statements on an insurance application. Changes in a medical practice that creates unacceptable exposure to claims. Furthermore, failure to comply with the business relationship, i. e. not paying a premium, or loss of a licence to practice medicine.
Some medical malpractice policies only cover direct patient care and exclude care outside of geographical boundaries, i. e. state or nation. Some policies allow for coverage in work related activities. Medical malpractice insurance may assist with legal expenses related to adverse actions against the physician’s credentials or licence.
New York is again the highest state in terms of per capita payouts at $36.15 paid out for every individual residing in the state. The northeast as a whole had a per capita payout rate of $28.20, which is more than 3 times greater than the next highest region (the Midwest).