Part 2 of 3
There’s a reason Wisconsin is one of the safest places to practice medicine; it’s long been a haven for affordable medical professional liability (MPL) insurance. Which, among many other reasons, also makes it a great state to be a patient in.
But now, as the rest of the country feels the impact of increased MPL premiums, it may only be a matter of time before Wisconsin physicians see similar increases.
The economics behind this growing threat are relatively simple- insurance companies make money by collecting premiums, investing those premiums, and then paying out claims that are less than the income they make on their investments. On a national level, adverse litigation trends, an increased frequency of severe claims, and years of poor investment returns are driving down insurance company profits. As a result, MPL insurers are increasing premiums for the first time since 2001.
Several states have already seen significant premium hikes and higher deductibles, along with reduced coverage options and fewer (if any) risk management services. It gets worse; some insurers are exiting the market all together.
It’s a classic hard market scenario: if they aren’t already, physicians and employers of physicians will be paying more for less.
However, because of a number of factors, Wisconsin physicians have been shielded from this trend.
Wisconsin is different… in a good way
Thanks to the efforts of the Wisconsin Medical Society, the AMA, and the medical-legal community in general, Wisconsin has always been among the top states when it comes to affordable MPL insurance.
One of the most significant factors was in 1975 with the creation of the Injured Patients & Families Compensation Fund. Physicians and other health care providers pay into the fund, which covers malpractice awards greater than $1 million. Physicians must purchase their own MPL insurance to cover claims less than $1 million. Bottom line: A physician’s personal assets are never at risk in Wisconsin thanks to this fund.
In addition to being instrumental in the creation of the fund, the Wisconsin Medical Society has consistently and effectively lobbied the state legislature resulting in the capping of non-economic damages and other legislation beneficial to physicians.
Wisconsin currently has capped non-economic damage claims at $750,000. The state also guarantees full recovery of economic damages awarded by a jury. This includes awards for past and future medical expenses as well as lost wages.
When a 2012 malpractice suit resulted in a ruling the cap was unconstitutional, the Wisconsin Medical Society, along with the AMA’s Litigation Center, stepped in. They jointly argued against the ruling and asked the state Supreme Court to review the case. In 2018, the state Supreme Court rejected the lower court’s ruling and confirmed the cap’s constitutionality.
What the statistics tell us
Consider these statistics for the period of 2004 to 2018 from the National Practitioner Data Bank managed by the Department of Health & Human Services:
- In 2004, an approximate total of $4.6 billion in claims was paid. This sank to a low of just over $3.5 billion in 2012 and has risen to just over $4 billion as of 2018.
- In the same time period (2004 – 2018) the number of claims has declined from approximately 17,000 to 11,584.
- Conversely, the average paid claim has risen from around $260,000 to $348,000
Considering that the last time we saw a hard market was in 2001, these statistics are likely contributing to the national trend away from the historically lengthy soft market.
When it comes to the per-capita medical malpractice costs for all practitioners (from 2012 – 2016), Wisconsin was the lowest with an average of $3. This compared to New York’s number-one ranking of $36.
But, here’s something to watch in light of the national trends and the hardening of the MPL insurance market. Even though the number of claims paid in Wisconsin has dropped (as of 2016, the state ranked #50 out of 51 in the claims frequency category), we’ve seen a spike in paid claims from 2016 to 2017. Total paid claims for all healthcare providers went from 17 to 39 with the total payout jumping from $4.83 million to $14.28 million.
Who you gonna call?
While there are no hard market busting solutions out there, Wisconsin is most likely to remain one of the least expensive insurance havens in the country. Clyde “Bud” Chumbley, MD, CEO of the Wisconsin Medical Society, agrees saying, “The Society is vigilant and will continue to play a significant role in ensuring our physicians are protected from unreasonable and unnecessary insurance premium increases.”
While the Wisconsin Medical Society and others are acting on your behalf, there are some fundamental ways you can protect your ability to acquire and maintain the right amount of professional liability coverage. We will dig a little deeper into what you can do to better manage your risk and the help that you can expect from a dedicated and experienced insurance brokers in the third part of this article.
In the meantime, if you have any questions regarding what the future of MPL holds for you, contact your trusted insurance and risk advisor.
Shawna Bertalot, CIC, ACI, President WisMed Assure