A well-deserved thank you to healthcare providers: Considerations in premium refunds for medical professional liability coverage stemming from the novel coronavirus pandemic

Medical providers have experienced two realities as the novel coronavirus (COVID-19) has spread across the United States. Some have treated patients in overwhelmed conditions, sometimes under a crisis standard of care. Others have significantly reduced visits and procedures as part of social distancing. The financial impact to physician practices seeing fewer patients, a large portion of which operate as small businesses, has been significant. In response, medical professional liability (MPL) insurers have provided deferrals in premium payment, coverage for volunteers without premium charge,^1,2 dividends,³ leave of absence endorsements,⁴ and reductions in future premium rates,⁵ among other adjustments.

Last week, the California Department of Insurance (CDI) addressed this concern as it ordered insurers to issue a “premium credit, reduction, return of premium, or other appropriate premium adjustment” to property and casualty policyholders across multiple lines of business, including MPL.⁶ The refund is intended to reflect reduced exposure for the March and April time period stemming from the COVID-19 pandemic, and includes the possibility of future extension. No insurer would consider a refund calculation to be straightforward, but there are unique considerations for MPL coverage not present for other lines.

Work hours for providers in certain specialties have been cut by 50% or more.⁷ But reduction in hours alone may not be a good measure of the decrease in exposure under current circumstances. Consider an obstetrician-gynecologist (OB-GYN) who is currently likely to be seeing only pregnant patients and has delayed non-urgent visits for all others. The OB-GYN might be working half-time, but the exposure to childbirth and pregnancy-related claims is unchanged. In addition, there may be increased exposure to future delayed diagnosis claims from rescheduled visits for other patients.

Those providers still treating non-urgent conditions are largely doing so through telehealth services. While increasing access to care, the sudden shift to virtual office visits, up more than 100% from the first week of March,⁸ may result in increased MPL risks. Physicians are now making diagnoses over telehealth platforms for conditions that would have required in-patient visits two months ago.⁹

Patients delaying healthcare, a situation exacerbated by the coronavirus pandemic, may increase the risk for MPL claims in the future. The interaction of a backlog of patients and increased acuity upon resumption of services could portend poorer patient outcomes. Physician practice leaders may find themselves navigating the new normal of running a business in the post-coronavirus world compounded by the stress of the impact from delayed healthcare.

That said, certain specialties will likely see fewer claims from reduced patient encounters. At least one insurer of dental professional liability has reduced all insureds to part-time status with an associated premium credit.¹⁰ Surgeries have declined significantly at hospitals, due primarily to restrictions on elective procedures, but anecdotal reports indicate the number of patients admitted for even emergent conditions such as heart attacks and strokes has declined.¹¹ The decline in emergent medical care is concerning as it suggests patients may be delaying needed care, perhaps contributing to the recent rise in deaths at home in certain locales.¹² However, fewer patient encounters will likely mean fewer MPL claims.

Insurers should also be careful to consider the distinction between claims-made and occurrence coverage in assessing possible credits. Most MPL policies are written on a claims-made basis, triggering coverage at the time of claim report rather than the occurrence of the underlying event. Claim reports may be depressed in the short term due to court closures as this limits the ability of plaintiff attorneys to file lawsuits. Presumably, this reduction is temporary and will largely reverse itself when courts re-open or make accommodations or requirements for electronic filing.¹³ Further, due to the dynamics of claims-made coverage, any reduction in exposure due to fewer patient encounters now will be spread across multiple policy years going forward.

For occurrence coverage, a reduction in patient encounters may reduce exposure to claims in the current policy year. Any reduction in premium would need to consider the change in patient mix and services provided as well as the future impact of delayed procedures. The impact will vary between providers and facilities as well as by provider specialty. However, variation in the reduction may be difficult to measure, requiring insurers to make broad estimates based on aggregate data.

Lastly, consider that any appropriate premium adjustment will depend on whether state tort law has been temporarily modified to extend immunity to healthcare providers during the pandemic and how widespread that immunity is. Some states have extended immunity only to those treating COVID-19 while others have issued broader changes temporarily extending immunity to providers treating other conditions as well.¹⁴ States with more widespread declarations of immunity can expect to see a greater reduction in costs for the duration of the pandemic.

Actuaries are accustomed to pricing future costs based on past losses. But the COVID-19 pandemic has taught us the past is only one piece of data in making these estimates. Modeling the coronavirus pandemic itself is difficult,¹⁵ but modeling MPL costs affected by this pandemic is exacerbated by tort law changes, variation in effect among specialties, and an apparent reduction in current claims that may prove to be only a delay contributing to an increase in future reported claim frequency.

¹The Doctors Company. (March 25, 2020). Press release: Retired Physician Volunteers Receive No-Cost Malpractice Coverage during COVID-19 Pandemic. Retrieved on April 22, 2020, from https://www.thedoctors.com/about-the-doctors-company/newsroom/press-releases/2020/retired-physician-volunteers-receive-no-cost-malpractice-coverage-during-covid-19-pandemic/

²MLMIC Insurance Company. Coverage Continuation for Returning Physicians Volunteering to Battle COVID-19. Retrieved on April 22, 2020, from https://www.mlmic.com/covid-19/returning-physicians

³ MICA, A Mutual Company. What’s New & Archive. Retrieved on April 22, 2020, from https://www.mica-insurance.com/ContentData/WhatsNewArchive/aa664d4b-a127-df11-80d3-00155d0a3905

⁴National Chiropractic Mutual Insurance Company. Coronavirus Policy Updates. Retrieved on April 22, 2020, from https://www.ncmic.com/malpractice-insurance/coronavirus-covid19-resources/

⁵Magmutual. (April 9, 2020). New COVID-19 Premium Discount Plan for 2021. Retrieved on April 22, 2020, from https://www.magmutual.com/covid19-premium-discount-plan

⁶California Department of Insurance. (April 13, 2020). Bulletin 2020-3. Retrieved on April 22, 2020, from http://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/Bulletin_2020-3_re_covid-19_premium_reductions-2.pdf

⁷Reed, Tina. (April 14, 2020). Nearly half physician’s practices have had to lay off, furlough workers, MGMA survey finds. FierceHealthcare. Retrieved on April 22, 2020, from https://www.fiercehealthcare.com/practices/nearly-half-physicians-practices-have-had-to-layoff-furlough-workers-mgma-survey-finds

⁸Savitz, Eric J. (April 15, 2020). Teledoc Stock Surges on Huge Growth in Virtual Doctor Visits. Barron’s. Retrieved on April 22, 2020, from https://www.barrons.com/articles/teladoc-stock-surges-on-huge-growth-in-virtual-doctor-visits-51586967978

⁹Gold, Jenny. (April 14, 2020) Pediatric Practices Struggle To Adapt And Survive Amid COVID-19. Kaiser Health News. Retrieved on April 22, 2020, from https://khn.org/news/pediatric-practices-struggle-to-adapt-and-survive-amid-covid-19/

¹⁰Fortress, Protection for Dentistry. Novel COVID-19 Information And Frequently Asked Questions. Retrieved on April 22, 2020, from https://www.dds4dds.com/covid19

¹¹Krumholz, Harlan M. (April 6, 2020). Where Have All the Heart Attacks Gone? The New York Times. Retrieved on April 22, 2020, from https://www.nytimes.com/2020/04/06/well/live/coronavirus-doctors-hospitals-emergency-care-heart-attack-stroke.html

¹²Hogan, Gwynne. (April 7, 2020). Staggering Surge of NYers Dying in Their Homes Suggests City is Undercounting Coronavirus Fatalities. Gothamist. Retrieved on April 22, 2020, from https://gothamist.com/news/surge-number-new-yorkers-dying-home-officials-suspect-undercount-covid-19-related-deaths

¹³California Courts Newsroom. (April 17, 2020). News Release: Judicial Council Mandates Electronic Service of Documents in Most Civil Case. Retrieved on April 22, 2020, from https://newsroom.courts.ca.gov/news/judicial-council-mandates-electronic-service-of-documents-in-most-civil-cases

¹⁴Medical Professional Liability Association. COVID-19 Pandemic State Government Activity. Retrieved on April 22, 2020, from https://mplassociation.org/docs/GR/COVID-19/State_Government_COVID-19_Activities_Compendium_MPL.pdf

¹⁵Koerth, Maggie, Bronner, Laura, & Mithani, Jasmine. (March 31, 2020). Why It’s So Freaking Hard to Make a Good COVID-19 Model. FiveThirtyEight. Retrieved on April 22, 2020, from https://fivethirtyeight.com/features/why-its-so-freaking-hard-to-make-a-good-covid-19-model/