By Karl Olson, Vice President, Professional and Management Liability Practice Leader, Burns & Wilcox Brokerage
No one in the insurance industry could have predicted the challenges the U.S. and the world is now facing because of the COVID-19 pandemic. On a local level, healthcare practitioners are putting their health and safety on the line by caring for patients and the country owes physicians, nurses, EMS professionals and all healthcare practitioners a sincere “thank you” for these efforts.
On the business side, the impact on Medical Malpractice is significant. The payout for Medical Malpractice claims totaled nearly $4 billion in 2018—reflecting upward trends in claim rates and premiums. Now, the market has been further thrown into a world of uncertainty because of the virus.
It has become an environment where carriers are being more cautious than at any other point in memory. The risks are significant because of uncertainty. While some healthcare facilities have been able to pivot to necessary functions many are unable to institute the fundamental and swift changes for the short-term economic needs.
Further complicating matters is the idea that carriers and medical facility owners likely will disagree on the level of risk currently in place, resulting in the potential for hasty buying decisions by providers. Those who have served on the front lines of the COVID-19 battle, such as ER and ICU physicians, are at higher risks because of the increased potential for exposure.
The nature of COVID-19’s spread is another concern. An employee who tests positive for the coronavirus could unknowingly spread the virus to patients or living facility residents. If the perception that this type of spread led to hospitalization, long-term medical issues or even death, additional exposure exists. At worst those providers may be at risk of a wrongful death claim that could financially cripple them. As a result carriers are considering a singular limit rather than multiple, reduced limits.
It’s too soon to predict the number of Medical Malpractice claims that may result from the pandemic, but an evolving marketplace is likely. Two months of fewer medical procedures does reduce the base for exposures, but there are also heightened risks emanating from delayed medical care, reduced capacity to provide medical care, and the contraction of direct patient-provider interaction.
Regardless, there is recognition that providers need help. Many provider-related organizations have already sought assistance from state or federal governmental entities. The Miami Herald reported in late April that the Florida Medical Association, the Florida Osteopathic Medical Association, and the Florida Justice Reform Institute, requested protections from Medical Malpractice lawsuits early on during the pandemic for care.
There has also been a near-term relaxation of several healthcare related regulations in regards to COVID-19. For example, “hospitals without walls” may extend inpatient care to ambulatory surgery centers (ASCs). In addition, the use, access and release of protected health information using HIPAA guidelines were loosened to help better track the virus’ spread; and medical practitioner licensing restrictions have been eased to allow physicians to support “hot spots” in other states. Medicare waivers have been established by CMS and wider reimbursement options have been granted to telemedicine strategies.
With physician care during the height of the pandemic at a premium in some parts of the country, the Coronavirus Aid, Relief, and Economic Security (CARES) Act offered temporary liability protection to volunteer physicians and other healthcare professionals according to the National Law Review and other news sources.
It remains to be seen how effective the easing of these restrictions have supported healthcare providers dealing with the impact of COVID-19. As policies are up for renewal and new ones are being created, carriers are increasingly asking insureds a list of questions to help determine the amount of risk, available coverage and premium costs. When healthcare providers are shopping for Medical Malpractice policies, or signing up for renewals, providers will want to show that they have a plan in place, no matter the type of care they offer. Establishing and showing proof of a strategy for emergency response teams, risk management and other ways to react to the virus will make them more “insurable” in the short-term.
That’s critical because the policy coverage and other requirements will evolve as the economy reopens. Whether it’s an orthopedic practice or an ASC, providers need to make sure they are prepared for flare-ups, have a procedure to deal with employees contracting the virus, and more. Executive orders vary from state to state, county to county, and even city to city, which is making it difficult for most providers to understand requirements. The continued uncertainty puts a higher level of importance on the decisions made now, because the requirements needed to affordably secure renewals will evolve in the coming months.
The longer the uncertainty continues, the more carriers tighten coverages. Carriers are also apt to be less aggressive to pursue new business, so demand and supply may both fall. Meanwhile insurers could reduce coverage or limits, or drop coverage altogether.
Telemedicine offers additional requirements with patients desiring remote forms of care to limit spread and exposure for non-emergencies. That desire for telemedicine may be inherent with providers as well, but only if they are reimbursed. As of July 2019, only 32 states plus the District of Columbia required private insurers to cover telemedicine the same as in-person services according to an Advisory Board report. Additionally the potential for increased claims as a direct result of telemedicine-based care is unclear and complicated. One report has suggested that most telemedicine malpractice cases involve physicians who prescribed medication across state lines without in-person examinations.
Then there’s the likelihood that many healthcare providers may be unable to overcome the inherent financial challenges. Elective procedures, physician therapy and other services that may be among the more profitable for physicians have been canceled or postponed because of executive orders and shut downs. At least 30 million Americans filed for unemployment by May 1, and an estimated 13 million of those had healthcare coverage tied to their job. Without coverage, these consumers may elect to not pursue care that is not deemed to be critical for financial reasons.
Practices and clinics that endure may experience pent-up demand in the months ahead. This could partially offset the fact that consumer spending on healthcare dropped 18 percent during the first quarter of 2020.
Healthcare providers should keep their policies in place for as long as possible if there is any potential of the practice continuing operations. Looking ahead, a recovering economy and pent-up demand for medical care will create opportunities for new coverage options given the evolving nature of the delivery of care as well as ongoing COVID-19 impact.
This commentary is intended to provide a general overview of the issues contained herein and is not intended, nor should it be construed, to provide legal or regulatory advice or guidance. If you have questions or issues of a specific nature, you should consult with your own risk, legal, and compliance teams.
