Time for a health check

The healthcare sector is rallying after the pandemic, but in the medical indemnity market, some headaches linger

By Claire Heaney

If an emergency physician was describing Australia’s medical indemnity insurance market, they might say it is in fair condition. The vital signs are stable and within normal limits. It is conscious, a bit uncomfortable, but a favourable or even promising outcome is expected.

A temperature check reveals a backdrop of pandemic-stressed healthcare workers, staff shortages and concerns about the delayed diagnosis of late-presenting patients.

Increasingly demanding patients, more regulation, evolving technology, medical inflation and a changing medicolegal landscape are all in play.

“For some [staff], the demand and workload has not slowed, and many are still working long hours. As a result, many patients are finding it harder to access appointments with healthcare providers, meaning that some patients present to practitioners later, more unwell and with more complex symptoms or conditions requiring treatment,” Medical Indemnity Protection Society chief medical officer Dr Owen Bradfield says.

The global healthcare landscape continues to rapidly shift, driven by emerging technologies, new treatment modalities and a focus on personalised medicine, he says.

“This has led to a complex and ever-changing clinical and healthcare regulatory environment that is increasingly difficult for health practitioners to navigate.

“This is where medical indemnity insurers are critical in helping practitioners understand and chart a course through this complexity and uncertainty.”

Avant Mutual says it welcomes moderating conditions in the sector, with private practice returning to pre-pandemic levels.

“We continue to operate in an environment of stability where medical indemnity insurers are well capitalised and highly regulated by the Australian Prudential Regulation Authority, and affordability is well supported by government schemes,” Avant tells Insurance News.

“We can’t speak for the rest of the industry, but Avant’s average rate increases have been below [inflation] for the past few renewal cycles.

“Some limited specialities have experienced double-digit increases, but this reflects significant increases in the frequency and severity of claims for those specialities and represent less than 1% of our member base.

“Avant looks at the affordability of medical indemnity premiums for our members, and the median premium to billings ratio for our members is less than 3%. Where a practitioner has a premium that exceeds 7.5% of their billings, they are entitled to access the Premium Support Scheme, which has been in place since 2003 and reduces the impact of premium increases for practitioners with high premium to billings ratios.”

Avant is one of six medical indemnity insurance providers offering the Premium Support Scheme, a federal government program to ensure medical practitioners in rural areas, for example, are covered.

Avant says its medical indemnity claims experience has been mixed in the past year, with lower claims volumes attributed to the temporary impact of the pandemic and costs per claim growing faster because of inflationary pressures.

“While the number of new claims decreased overall, there was an upsurge in Medicare matters driven by Medicare compliance activity and there was a 15% increase in coronial matters as the Victorian and Queensland state coroners increased investigative activity.

“The decline in professional conduct matters was consistent with industry trends, as the Australian Health Practitioner Regulation Agency (AHPRA) annual report 2022-23 shows.”

Avant says it regularly assesses the risk from sectors of medical practice, the individual practitioner and their claims experience, to ensure policy conditions reflect the risk of future complaints and claims.

Insurance experts say striking a balance between regulatory compliance and burden is an ongoing challenge.

The industry is regulated by a range of bodies including AHPRA and medical boards. Regulation to tighten cosmetic surgery practice and telehealth services has been finalised and insurers have helped shape these changes and educate policyholders.

Dr Bradfield says AHPRA’s continued focus on public safety has generated a greater awareness of the public’s rights and options when it comes to healthcare complaints and notifications.

“However, our belief is that, while healthcare regulation is vital to maintaining high clinical standards in Australia, healthcare regulation must also be timely and reasonable for practitioners.”

Dr Bradfield says medical indemnity insurers do not just represent members when responding to claims, they also engage with them through risk education, advocacy and proactive medicolegal advice.

Aon national director for healthcare, aged care, life science and community services Kenneth Corcoran says there are several factors contributing to increasing claims.

“The rising cost of medical inflation, so it costs more to provide services than it did previously; the advancements in medical science that are seeing life expectancy increase and therefore the costs of future care increasing; and a dramatic increase in the incidence of ‘nervous shock’ claims contribute to the overall cost of claims,” he says.

In this context nervous shock relates to a person witnessing a relative suffering a medical injury from malpractice.

However, Mr Corcoran says, corporate medical indemnity premiums have remained steady.

“There have not been the dramatic increases we have seen in some other professional indemnity lines and directors’ and officers’, for example.

“Corporate clients are now largely looking to the Lloyd’s of London market for solutions as insurer appetite for high-acuity risks has diminished in the Australian market. Businesses that are performing well in respect of claims can expect small increases in premium, but this result will be impacted where claims activity is occurring.”

Medical Insurance Group Australia noted in its 2022-23 report that the trend of increasing claims costs continued year on year. Part of the increase in 2023-24 was absorbed by the insurer rather than being passed on to insureds.

“The risks of practice have been increasing as healthcare professionals have dealt with these changes while also having to contend with growing patient demands and expectations,” the group says.

“The chances of our members and clients being the subject of a complaint, inquiry or a claim has increased.”

The group says calls to its advisory service doubled last fiscal year, describing this as the “new normal” for the industry.

It has adopted stricter underwriting criteria in assessing and writing new business.

MDA National has introduced restrictions on cover for practitioners in private practice giving irreversible treatments to those who medically and surgically transition as children and adolescents. As of last July, it will limit cover for certain claims arising from the treatment of gender dysphoria in such younger patients.

Industry insiders talk about the challenges of AI tool ChatGPT and patients insisting they be diagnosed with the illness they have Googled. It is being termed “Dr Google on steroids”.

Sparke Helmore Lawyers partner and Lloyd’s Australia chairman Mark Doepel says everyone was watching the Cosmetic Institute’s $25 million settlement over breast augmentation in April.

It had been thought that a claim of medical negligence did not fit the class action provision of any relevant jurisdictions in Australia.

“We have seen a number of class actions involving doctors in both NSW and Victoria and one has just settled,” he says of the Cosmetic Institute case. He says the case has ramifications for people writing and covered by insurance.

“Of particular interest in that case is what appears to be the fact that there were real insurance issues at play. A number of medical negligence insurers were joined to the case in their own right.”

He says he is starting to see more insurers involved in cases about the interpretation of medical negligence insurance.

In Australia, medical negligence coverage is usually up to $20 million, but Professor Doepel says the case raises the question of whether that is enough.

He says in recent years there has been a notable increase in matters against health practitioners relating to regulatory and disciplinary matters.

“This has seen a change in policy conditions, such that sub-limits for such cover are being significantly lowered due to legal costs that can be incurred in relation to matters which, while not involving court litigation, can be both lengthy and expensive,” he says.

Professor Doepel says some concerns during the pandemic, including staff exhaustion, have not eventuated.

While there has been talk of potential claims out of telehealth, this has not occurred. However, he points to changes to telehealth guidelines by the Medical Board of Australia from September 2023.

He says the industry is looking at the US where there is growth in claims around conduct in the workplace and the duty of care to staff.

“While we have seen some limited examples, there is some extreme behaviour in the US.”