Assessing the impact of medical insurance malpractice on physicians and patients require a better understanding of the method of working of the medical insurance malpractices and the reasons for change in premiums. This review provides the basic description of these issues in addition to discussing the impact of the medical insurance malpractices on physicians and patients. • The ways in which the medical insurance malpractices works • The amount being spent by the public on the medical insurance malpractice system.
• The scope and extent of medical malpractice crisis • The causes for the medical insurance malpractice crises and • The impact of the medical insurance malpractices on the physicians and patients How does Medical Insurance Malpractice work? Almost all the States in US have prescribed the legislative requirements for the physicians to carry liability insurance. In the case of those states where there is no such requirement the physicians have to have an insurance coverage to claim the privilege of seeing the patients in the hospitals.
Under certain circumstances the physicians are allowed to go without any insurance coverage (Kachalia et al 2005) The insurance is being bought by the physicians either from a commercial company or a mutual company owned by the physicians. The insurance may be bought either individually or through a group practice. In the case of hospitals and other health care facilities they buy their own insurance and where physicians are employed by a hospital the policy is bought covering both the hospital and the physicians.
The insurance in the case of physicians employed by the Federal government the covering of the insurance becomes the responsibility of the federal government and any suit or claim is preferred against the government. In the case of physicians employed by the States the insurance is arranged by the States. (Mello, M, 2004) For charging premiums on the malpractice insurance the provider’s degree of risk is taken as the basis while the experience rating is not used widely.
The insurers normally base their premiums on (1) the expected payouts calculated for providers in a particular group, (2) the uncertainty that is expected to surround this estimate, (3) the investment income expected and the proportion of administrative expenses there on and (4) the profits the insurers want to make on these kinds of insurances. (Mello. M, 2004) There is a difference between how auto insurance works and physician professional liability insurance works. The auto insurance is generally based on experience rating.
In the case of an auto insurance if the motorist has preferred a claim then his insurance premium goes up. But in the case of the physicians malpractice insurance the premiums are priced according to the specialty of the physicians and the geographic locations. Usually only these two factors are taken into account while some insurance companies also consider the number of hours worked and nature of setting of work within the specialized field. The experience rating could not be worked out in the case of physicians as the experience of physicians’ claims is too varied over the shorter periods of time.
This lack of experience makes the actuarially stable estimates of risk associated with medical malpractice too difficult to comprehend. (Mello, M, 2004) But in the case of hospitals a maximum of 25 percent of the premiums are based on experience rating. In the case of hospitals the experience rating becomes more feasible since the experience over the claims of hospitals is more stable over the periods of time. There are variations in the premiums depending on whether the hospital is located in urban or rural areas.
The premiums also change depending on the clinical services being offered by the hospitals. (Mello, M, 2004) Normally the settlement of a claim on medial malpractice takes four to five years from the date of the happening of the incident. (Nordman et al 2004) In many of the states there is a time lag of two to three years up to which a plaintiff can wait till a claim resulting from malpractice can be claimed. Because of this long time gap, insures are unable to determine their ultimate liability on the policies. This difficulty also results in the insurers fixing the premiums at higher levels.
The administration of the malpractice insurance with respect to the adequacy and accuracy of the premiums is left to the state. It is made the responsibility of the states to ensure that the premiums are not “excessive, inadequate or unfairly discriminatory”. (Nordman et al 2004) In fact the variations in the regulations being adopted by the states result in variations of the premiums in different states. The state departments follow six different kinds of rules for regulating the medical liability insurance. In a way regulations have a significant influence on the insurance prices.
However it has not been possible to precisely estimate whether the regulations could lower or increase the premium rates. Theoretically regulations can impact the insurance premiums to keep them higher or lower unlike in the unregulated markets. The prices may rule higher if the regulations fix floor prices with a view to protect the consumers against the potential danger of the insurance companies becoming insolvent due to drop in the insurance rates and also due to incurring of liabilities in respect of the claims that have mounted to an extent the insurance companies are unable to settle.
The rates may prevail less if the regulators refuse to approve the hikes in the insurance premiums with a view to make insurance more affordable to the consumers. This hypothesis is based on studies conducted in auto insurance markets. (Barth, 1993) However there is no literature available to prove this hypothesis in professional liability insurance.