The Affordable Care Act has obviously changed the health and benefits insurance marketplace, but the medical malpractice industry has also been affected. Mike Grady, president of independent agency Grady Professional Services, which writes medical professional liability in 15 states, says the med mal segment is facing increased losses and costs because of the shift to the accountable care organization model and healthcare consolidation. In this interview with MyNewMarkets.com, Grady discusses how healthcare uncertainties are challenging the med mal marketplace and what agencies can do to deal with the changes.
MNM: There’s been a lot of changes to the medical malpractice area and the healthcare sector overall. How is the Affordable Care Act (ACA) affecting the insurance industry, in terms of medical malpractice coverage trends?
Grady: Most companies are continuing to broaden their coverage options. If we were to go back 10 years, most companies – national or regional – were focused on physician or group medical professional‑liability insurance. Now many companies are offering MediGuard (regulatory coverage), cyber liability, employment‑practices liability – a variety of enhanced coverages. I expect these offerings to continue to expand, even into managed care E&O, directors & officers coverage, potentially provider stop‑loss, possibly even property/casualty, workers’ compensation coverages.
MNM: What are some of the details of the Affordable Care Act that are especially impacting insurance agents and brokers in the medical‑malpractice insurance space?
Grady: I think that, although none of the experts can truly estimate the real numbers, the amount of additional people in the United States that are going to utilize health care will be significant. There’s a few dynamics there at play. You have an aging population of physicians. You have less people going into medicine. You have more individuals that are going to need coverage. It’s going to drastically change the delivery of health care. I think you’re going to find that physician assistants, nurse practitioners, CRNAs, and nurse midwives, are going to see an increasing role in the delivery of health care.
The interesting side of it, with respect to most of the malpractice carriers, is, in the past, most of those ancillary professionals were covered for their work on behalf of the groups. I think that I can envision groups of ancillaries forming in the future, which will force some of the med mal companies to amend their views on coverages, their current limitations, and how they view insuring a lot of these extenders.
MNM: Are you referring to ACOs, or accountable‑care organizations, and those kinds of entities? The insurance industry seems to have struggled a little bit with how to cover those.
Grady: I think they’re struggling with respect to all of the needs of these ACOs, the different coverages that may be put into place. I think the other struggle the insurance companies are going to have is as these ACOs are forming they’re attempting to use their leverage to get their premium in a more competitive budget.
Most of the med mal companies are looking at their individual books of business, and seeing not only the large groups growing, but the losses in the large groups growing because they’re under pricing pressure with these large groups to keep them, but at the same time, the losses keep on coming in.
It’s interesting that the amount of physicians that were maybe in the five‑to‑10 category are decreasing, and the solo practitioners are decreasing significantly. A lot of them are joining larger groups, ACOs, etcetera, and then, let’s say the price per physician is maybe 20 to 30 percent less, but the losses continue to come in. It puts the med‑mal companies under some pricing pressure to not only find additional coverages to replace that premium, but also to figure out where they want to play in an attempt to be profitable.
MNM: In your experience as an independent agency, what have been some of the challenges in working with your clients, and also in working with insurers [because of the ACA]?
Grady: Obviously, some of the challenges can be renewal retention. You’re going to lose certain accounts, because they were acquired by larger accounts, or formed with other groups. You’ve got to find a way to replace that revenue. The other challenges, because it’s in the infancy stages, is to find the different coverages that these ACOs or other large organizations need.
Although, the med mal companies are working fast and furious – one of them bought a workers’ comp company, another one has moved into writing more facilities and the multiple layers of the facilities, another one is working on a suite of products to bring to these large physician groups – the agent is struggling to find these products, replace the revenue, and try to retain as much as they can of business that’s not, A.) being sold to a hospital or, B.) joining a larger group that the agent doesn’t currently insure.
MNM: Is it overwhelming for [med mal] agents to understand everything that’s happening with health care, and how it affects their clients? Do clients expect their agents will know everything and help them with everything they need?
Grady: There is quite a learning curve there…We’ve found for ourselves when we offer clients products we not only ask that they accept [coverages] in writing, but also decline all of the additional offerings or the coverages [in writing] in an attempt to protect our E&O. As everybody is quickly educating themselves on the different exposures, what’s available, what you need, what you don’t need, trying to get the client to understand and maybe it’s not in the budget this year… there’s a certainty of uncertainty, if that makes sense.
MNM: You mentioned the E&O aspect. Is there anything that you’re doing at your agency, or that you think other agents and brokers could do to manage their E&O exposures, in relation to helping clients sort through and be covered for the ACA?
Grady: We’ve found ourselves talking a lot more with our insurance‑company partners on what they’re currently offering, what they are going to offer, at what time frames they’re going to offer it – so that we can handle these changing needs of our clients. What I had mentioned previously is, we are getting our clients to sign off in writing more than we ever have before in the past on what they are buying, what they aren’t buying; that they completely understand that this exposure is covered, this exposure is not covered, so that there is no amnesia moments down the road.
MNM: What sort of tools or resources are med mal insurers offering to agents and brokers to help them become more educated about the ACA and protect their E&O?
Grady: We’ve found several of the different companies have national, regional meetings that include guest speakers, with respect to the Affordable Care Act, the forming of ACOs. They’re assisting their agency partners using a variety of social‑media resources in an attempt to also help educate the clients.
As they are developing their products, they are taking every opportunity they can to keep us in the know and assist us in the process to educate our clientele. I’ve probably sat in more meetings than I can think of in the last 12 months with regards to guest speakers on ACOs, the ACA, where this is going to go, predictions on this year and next year, the year after. It’s interesting that although everybody brings a certain value to the table, the amount of unknown that still exists is significant.
MNM: How does an insurance agency that deals with physicians, hospitals, and these new ACOs and has to provide important coverages for this segment of the industry deal with all of the unknowns? How has your agency dealt with this?
Grady: We attempt be as forthright as possible and completely transparent with our clients. The level of detail that we’ve gone to over the last six to nine months is three to four times what it used to be. Obviously, anytime there’s uncertainty and there’s a business relationship, you want the client to feel as comfortable as possible. Being completely transparent and sharing as much information as you have available, whether it be something that your agency generates, whether it be something that your insurance‑company partners generate, whether it be guest‑speaker presentations that you’ve found valuable. We have tried to go that extra mile with all of our clients, to keep them as up‑to‑speed as we are trying to be.
MNM: How do you think that the medical‑malpractice industry will change or adapt to the Affordable Care Act over the next three to five years, in terms of products or coverages, or entering new niches?
Grady: Historically, similar to agents, malpractice carriers were great at their market niche. The insurance companies that have been in and out of malpractice over the years have constantly ran back to property and casualty, but the ones that only did malpractice have really succeeded over the last 10 years and not really deviated from what they do best.
I think it’s going to be interesting to see the Doctors Companies, the Medical Protectives, the ProAssurances of the world figure out, “Hey, with this large ACO, do we need to handle their property and their workers’ comp, as well as their managed‑care liability, their directors & officers coverage, and their malpractice piece?”
Are they going to morph, or adapt to that- how should I say it -more of a P&C carrier that we would buy our auto insurance or homeowners from? Will they have all those types of products, that they can handle every need of that client? I think most of them are trying to figure that out right now….
The Doctors Company and several others, with their social‑media and their educations of ACOs and the Affordable Care Act and what have you, they’re all moving quickly with regards to helping the independent agents retain their clients and hopefully capture some new opportunities and move forward, but like we said, we’re really in the infancy stage of this.
What the companies are today versus what they were 10 years ago is completely different. That’s going to happen again, probably three to five years from now, if they want to survive, blossom, and expand and move forward.
To hear more of the interview with Grady, listen to the podcast below: