The overall cost and frequency of so called $50m plus ‘super losses’ in the US healthcare insurance sector are on the rise according to specialist healthcare insurer Hiscox. Despite the clear benefits of the implementation of quality and patient safety measures, the large losses keep on getting larger with, in the last two years alone, juries awarding well over $1bn in total damages for just seven medical liability cases.
While there are many healthcare institutions who continue to risk manage their more modest loss levels well, many others are experiencing mid-sized losses getting steadily larger together with a rise in frequency of catastrophic medical loss. With record awards being made in cases ranging from inadequate staffing at nursing homes, to medical negligence in hospitals, seven US states in 2011 declared their largest ever medical malpractice awards. While some cases have been, or will be revised down on appeal, there are clear signs that the overall trend in ‘super losses’ is upwards.
Rise of the super loss: recent awards
| Date | State | Award | |
| March 2010 | New York | $60.9m | Negligence at birth |
| July 2010 | California | $670m | Inadequate staffing at assisted-living facilities |
| July 2010 | Florida | $114m | Wrongful death suit against a nursing home |
| May 2011 | Connecticut | $58.6m | Negligence at birth |
| August 2011 | West Virginia | $91.5m | Nursing home negligence |
| October 2011 | Michigan | $144m | Negligence at birth |
| January 2012 | Florida | $168m | Brain damage following surgery |
Commenting, Ian Thompson, Senior Vice President, Healthcare, Hiscox, said: “We have real fears that the bigger so-called ‘super losses’ are getting worse and becoming more frequent. In addition there is increasing evidence that batch losses, where the insured has the ability to place losses together under a common aggregating cause, are also increasing in size and frequency – the recent case involving the overuse of coronary stents in Maryland is a good example of a batch loss that certainly has the potential to become catastrophic.”
Nick Williamson, Healthcare Actuary at Hiscox, added: “According to Hiscox figures*, more than half of all the largest healthcare claims in history have been paid in the last five years. Our research also suggests that losses above $5m are increasing at a concerning rate, from around 0.25% of all losses in 2000, to 0.7% currently and 1% by 2014; that represents a significant change.”
Ian Thompson concluded: “Given the question marks over the new Accountable Care Organization model as well as concern we might see another demonising of the Managed Care industry the trend for all losses, big and small, could see more worsening, and in different areas. We are already seeing numerous and very public reports coming out of the Hospital Data Privacy area, and challenging times appear to be ahead. With insurers charging premiums for catastrophic events often based on a 1 in every 200 or 300 year loss, it is time that the healthcare insurance sector took a careful look at its catastrophic exposures.
