Author: Patrick Marlow
A state's legal environment can influence the provision of healthcare services, as well as commercial insurance and risk management practices. A major impact is on the cost of insurance at the state level, which can increase substantially for healthcare providers. In some states, major admitted Medical Malpractice carriers are raising rates 9-10% each year, and most carriers insuring hospitals are doing so on a non-admitted basis, which may lead to hospitals needing to retain significantly more risk.
Increased costs can impact how healthcare providers make business decisions about offering services, including the potential to close down Labor and Delivery units. It can also make it more difficult to recruit healthcare providers/physicians to the state.
With reduced legal exposure, healthcare providers may adjust their practices to focus more on proactive risk management rather than defensive medicine. This shift can improve overall patient care and operational efficiency.
Overall, state-level tort reform can create a more stable insurance environment, allowing healthcare providers to allocate resources more effectively and focus on delivering quality care.
Tort reform guiderails we're watching
Insurance rates are directly tied to the claims experience. Verdicts that are incongruent with the economic and non-economic actual damages that plaintiffs suffered drive increased claims costs. This increase isn't from judgements only but also from increased appeal costs and increased settlements for fear of unreasonable verdicts.
Tort reform packages passed into law at the state level can provide several meaningful guiderails to verdicts, including:
- Banning anchoring, which prevents attorneys from suggesting arbitrary or inflated amounts for non-economic damages
- Providing for truth in damages (eliminating phantom damages), which requires juries to consider actual medical expenses incurred rather than inflated or billed values
- Establishing bifurcated trials, which allows trials to be split into two phases, one to determine liability and another to determine damages
The role of judicial discretion on bifurcated trials
Gallagher is specifically monitoring the provision for bifurcated trials. There are claims cases where a healthcare provider ultimately met and/or exceeded standards of care, but due to the outcome, juries have sometimes taken it upon themselves to reinterpret the rules, posing the question, "Could anyone have done anything more?"
Requiring that negligence be established before awards has two major impacts:
- Instead of allowing juries to award a lower amount because they don't feel the act was truly negligent, they have to face the defendant with a determination of negligence.
- It allows the opportunity to negotiate settlements once the determination is made. This exceedingly important guardrail prevents juries from trying to simply compensate people because of the outcome — even with no negligence established — by separating the two determinations.
Navigating the risk and insurance impacts
Nationwide, we're ready to help support our clients manage their risk and insurance programs.
Gallagher can help you:
- Stay aware of the changes in liability, potential cost implication and the overall legal landscape.
- Conduct a comprehensive risk assessment to identify areas where you may be vulnerable due to changes in tort laws, understand your exposure and develop strategies to mitigate risks.
- Explore customized insurance and risk management solutions to fit your unique needs.
- Build a go-to-market strategy that helps ensure policy terms reflect the realities of the new legal environment.
- Understand the claims process.
