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medical indemnity

medical indemnity providers for Australian doctors

Victorian State Hospital employees

  • the following was the case c2000 please check if it is still the case:
  • indemnity where applicable, is provided for by VMIA
  • staff are “fully” indemnified for public patients and also private/compensible patients within ED as long as they do not bill these patients and directly receive the money.
  • but will staff be indemnified in 12 yrs if a child hit be a car is managed in ED and has a latent claim?
  • staff appear to be indemnified for outpatients for which they directly bill once they are placed on a public waiting list such as shared care BUT NOT prior to that point, hence there is a risk for shared care GP's managing the early part of of pregnancy in particular.

a brief history in Australia

1990's

  • medical indemnity coverage increasingly expensive for doctors and at the same time created risk that the indemnity providers may not be able to pay for their future liabilities.
    • factors increasing costs:
      • litigation rates & costs have soared (estimated rate of increase per doctor = 15% compound per year) due to:
      • consumerism, fuelled by “no win - no fee” lawyer arrangements
      • longer life expectancy of severely handicapped people with resultant rising cost of higher claims
      • rising costs of future cost of care for those disabled
        • in NSW case of Simpson vs Diamond, future costs of care contributed $9m of the $14m claim.
      • capping of general damages is high - usually $250,000-$350,000 depending on State
      • capping of economic loss (future loss of earnings) is high:
        • 2 x Average Weekly Earnings (AWE) in Qld & NSW & 3x AWE in Vic.
      • joint and several liability rather than proportionate liability:
        • if one defendant is found to be 10% responsible for an injury, he is responsible for paying 100% of the claim and then try to recover the other 90% from co-defendants, but if they have no assets or insurer, then tough luck for the paying defendant and his indemnifier.
      • definition of negligence appears to have become to wide, in favour of plaintiffs, and is no longer the more moderate test of reasonableness.
      • lack of reduction of a claim to account for the plaintiff's contributory negligence
        • reinsurance costs soaring:
          • insurance markets are cyclical, the “cheap” market of the early 1990's became expensive even before the effects of Sept 11 2001
          • collapse of insurance companies such as HIH which impacted indemnity providers who were exposed to HIH
      • investment returns have collapsed due to:
        • falling global stock markets since 2000
        • falling interest rates to long term lows
      • fiscal risk of latent claims years later which would be even more expensive by then:
        • State government Tort Law Statute of Limitations allowing latent claims well into the future:
          • eg. for children to be made up to 25-30 yrs after an event occurred
          • for others being from date of awareness of injury rather than the actual date of injury

1999, MDO's need more money

  • in 1999, medical defence organisations realised they needed to correct the historic under-funding of latent claims (IBNRs):
    • most medical defence organisations (MDO's) now offered their members a choice, in addition to the claims-incurred default, a cheaper, claims-made option which then usually had an exit fee to allow cover for latent claims. However, >85% of doctors surveyed by MIPS preferred the claims-incurred option.
    • many MDOs made “calls” to their members to make additional compulsory payments to cover the IBNRs.

April 2002, UMP applies for appointment of a provisional liquidator

  • whilst most MDOs were well on their way to funding the IBNR's, Australia's largest medical defence organisation, UMP, had not and thus applied for appointment of a provisional liquidator, thereby plunging Australian medical indemnity into crisis.
  • UMP had failed to build up sufficient reserves to pay future claims, but relied on charging membership fees that would meet the following year's estimated claim notifications & reinsurance premiums.

Oct 2002, PM announces measures primarily directed at enabling UMP to trade

  • determined to force MDOs with under-funded liabilities to correct that under-funding by imposing a levy on all members as at 30/6/2000.
  • the Commonwealth Government will meet half of the cost of insurance payouts larger than $2 million.
  • will provide a subsidy to some specialist doctors as part of a package of measures.
  • a Government guarantee to United Medical Protection and its subsidiary Australasian Medical Insurance Limited until 31 December 2003. The UMP Group is the MDO for around 50 per cent of Australia's doctors and went into provisional liquidation on 3 May last year. Without the guarantee, the UMP Group would likely have been placed in full liquidation placing doctors and the community at risk of un-met claims. The Government's guarantee has not yet been called upon and there are indications that UMP may resume normal trading later this year.
  • through the IBNR scheme, the Commonwealth has assumed certain unfunded liabilities of MDOs and will recoup the cost over time through levies on members. This will shore up the financial position of MDOs and particularly, the UMP Group. Without this arrangement, doctors would likely have had to fund these liabilities through calls. The levy arrangements allow the costs to be spread over time.

Dec 2002, the Medical Indemnity (Prudential Supervision & Product Standards) 2002 Bill

  • in response, the Commonwealth Govt introduced the Medical Indemnity (Prudential Supervision & Product Standards) 2002 Bill into the House of Representatives on 12/12/2002.
  • this forces all indemnity cover from 1/7/2003 to be via a contract of insurance rather than membership subscriptions with the following ramifications:
    • stamp duty must now be payable on the premiums
    • contracts are for claims-made NOT claims-incurred & thus there is risk that claims occurring during the insurance period but not becoming evident & thus not reported during the insurance period will NOT be covered (eg. when a doctor retires and terminates the insurance premium). These claims need to be covered by a separate “tail cover” insurance which presumably will be payable annually even after retirement.
    • capping of insurance claims (likely to be $20m) may lead to “blue sky” claims exceeding this amount, exposing the doctor to bankruptcy.

May 2003, Federal Govt "Blue Sky Scheme" expands its medical indemnity package

  • it will now ensure that doctors are covered for pay-outs of more than $20 million for claims notified under contracts-based cover since 1 January 2003 by agreeing to cover any claim exceeding the insurance cap by 100% of the excess amount and that medical practitioners will be able to get insurance cover to extend into their retirement, reflecting ongoing concerns in the medical profession.
  • the Blue Sky Scheme would be funded by a so-called ex-post charge imposed on the MDO that insures the doctor against to whom the damages are payable. So guess who ends up paying for this - yep, its likely the members of the MDO concerned will be hit by a ex-post levy to cover the blue sky amounts, the Fed. Govt pays none of it!

May 2003, Victorian State Govt revises Tort Law to reduce liabilities for claims

  • introduction of a 5 per cent threshold for general damages:
    • general damages for pain and suffering will be awarded where an injury is assessed at greater than five per cent impairment, however, exemptions apply including loss of a foetus, loss of a breast or sexual abuse;
    • for the five per cent threshold, the degree of impairment will be assessed through criteria set out by the American Medical Association Impairment Guidelines (AMA4) which are currently used by TAC & WorkCover schemes.
  • psychiatric impairment will be assessed according to a threshold of greater than 10 per cent impairment, while hearing loss will be assessed using National Acoustic Laboratory guidelines.
    • revised Statute of Limitations decreases the period in which a claim can be made after an injury:
      • the period for making claims for personal injury will be reduced from six years to three years for adults from the date the damage is discoverable, in line with a recommendation from the Ipp Review of the Law of Negligence.
      • the period for making claims for personal injury for minors under 18 will be six years from the date of discoverability
      • personal injury claims would also be subject to the Ipp Review's recommended 'long stop period'. This means a claim is barred 12 years after the event which caused the injury, even if it has not been discovered.
      • limitations could be extended by judicial discretion where it was in the interests of justice to do so, such as in cases of asbestosis and tobacco-related injury claims.
      • the reforms would apply to all people sustaining injury after 22/5/2003. However, in the case of people injured before today who have not yet brought proceedings in court, a transitional period will apply, giving them the capacity to bring proceedings up until 1 October 2003 before the new laws apply to them.
    • will also for the first time make it mandatory for medical professionals working in the private system to report medical errors
    • will also be introducing proportionate liability for claims for pure economic loss not related to death and personal injury – this latter measure in particular will provide further stability in the professional indemnity markets.
    • will also introduce legislation in the spring session to define more precisely the circumstances in which a person has been negligent in the exercise of professional or trade skills.
  • the “tail-cover” insurance arrangements are still not catered for and temporary arrangements will be available to those who need them in 2003/2004 at a cost of approx. $300 for the year.
  • there are still major anxieties regarding this as procedural doctors esp. obstetricians & shared care GP's may have to pay much higher fees as well as extend it to 12 years post-retirement rather than the 3 years that applies to the non-paediatric sectors.

Dec 2003, C'wealth Govt announces new indemnity arrangements

  • new guaranteed run-off reinsurance vehicle (RRV):
    • the RRV will provide free Govt guaranteed run-off cover to doctors when they leave the workforce either permanently or on maternity leave
    • the cost will be incorporated into normal premiums to ensure that run-off was available free of charge at the time the doctor needed it
  • Premium Support Scheme (PSS):
    • PPS will provide funding for 80% of a dr's indemnity costs if these exceed 7.5% of gross income & this will be provided directly through the doctor's insurers.
    • will replace the current specialty-based subsidies
    • insurers will be required to have premium income bands for each specialty that have regard to doctor's actual incomes & will be required to offer pro-rata cover for those doctors seeking cover for less than 1 year.
    • rural procedural GP assistance:
      • PSS will directly fund 75% of the difference between premiums for procedural GPs working in rural areas and those for non-procedural GPs in similar circumstances
  • lower threshold for High Cost Claims Scheme (HCCS):
    • HCCS will fund 50% of all claims above a $300,000 threshold (formerly $0.5m) up to a dr's limit of insurance
    • Exceptional Claims Scheme is retained
  • UMP liability contributions:
    • subsidised funding of those dr's required to make such contributions (ie. Dr's who were with UMP in 2000)
  • working party in 2005 to evaluate effectiveness of these measures
edadmin/medical_indemnity.txt · Last modified: 2015/11/27 10:21 (external edit)