By Andrew Wheeler, Managing Director, Specialty Casualty
The US healthcare industry is never one to sit still. A number of disruptive forces are at work, all of which will form the basis of the most contentious debates and discussions at this year’s MPL Association Conference. Deep and profound transformation in recent times dictate that new trends continue to emerge and reshape the environment in which we live and work. This backdrop of change will certainly provide for an extremely exciting and interesting MPL Association meeting.
Of these new trends, perhaps the most important is the shift we’re seeing in how healthcare is being delivered. The trend towards the employment of physicians has had a profound impact on the MPL Association member companies. With employment approaching 50% nationally and significantly, almost 70% of those are under the age of 40, the trend can only continue. Aside from the obvious impact on MPL premium levels, member companies have had to diversify product and geography to accommodate this shift in risk.
The latest shift in the provision of healthcare is likely to be as, if not more, profound. Take Amazon, the business that seems to permeate every aspect of our life, and its recent focus on the healthcare industry. A partnership with Berkshire Hathaway and J.P. Morgan for an employer health initiative can only suggest a significant market share play in a $3.5bn sector. The acquisition of the internet pharmacy PillPack, the investment in medical diagnostics, a project to mine patient records and the start up of its own employee health clinic lead us to believe this will be hugely disruptive for the healthcare industry. The question is how do the MPL Association members adjust in order to meet these challenges, and what will be the impact on risk?
Then there is the changing face of claims. The industry has benefited significantly from the reduction in frequency experienced in recent years. Whilst we may see pockets where frequency is increasing, it is certainly not a national phenomenon. That being said, severity is unquestionably increasing at a rapid pace. The industry is still seeking the answer to what has driven this shift and Whilst there are several considered factors, much like with frequency reduction, the industry is still seeking the answer to what has driven this shift.. Put simply, the medical profession is losing cases at trial which in the past, perhaps, would have received a more sympathetic hearing by a jury. A recent TransRe claims report found that the average value of the top 50 medical malpractice verdicts is $29.55m, which is the highest it’s been in the last 18 years. We have also seen two cases in the last 12 month where awards have exceeded $150m. Of note, there is no discernible commonality as relates to specialty, geographic location or jury demographic.
Added to this is the well-publicised opioid crisis and the mass litigation, which has reached 1,548 federal court cases involving millions ofaffected people. In 2017, the US Department of Health and Human Services declared a public health emergency and announced a five-point strategy to combat the opioid crisis.
As an example of the scale of the problem, over half of West Virginia is addicted to opioids and in Ohio, over 1,500 state municipalities are suing the pharma companies for mass over-subscription of opioids. The case rests upon who should pay the bill and it may well become one of the most complicated legal battles in US history. Whilst the immediate focus of the plaintiff bar is on big pharma, MPL Association members and, for that matter reinsurers, are closely monitoring the potential for such litigation to expose physician or facility liability carriers.
Medical professional liability is in a state of flux perhaps greater than ever before. The challenges facing the sector need swift and decisive answers but also cross-sector collaboration to tackle. As a reinsurance intermediary, we at BMS are here to help. We are looking forward to discussions at MPL Conference so that we can tailor the tools and strategies needed to provide the best capital solutions.
The most profitable healthcare businesses will be those that adapt to the new environment and adopt technological change, improved actuarial modelling and disruptive thinking into their business model. So perhaps, together, we can ease the impact of change and usher in a new era of both profitable and sustainable growth.