Formed during the medical malpractice crisis of the 1970s, the medical professional liability
(MPL) industry has not just survived during the past 50 years, it has thrived. Throughout
periodic hard markets, healthcare industry consolidation, and the COVID-19 pandemic, the
industry, individual companies and the MPL Association learned to adapt to changing conditions.
This resilience has been an essential characteristic of an industry born in exigency. As MPL premiums spiked and carriers left the market in the 1970s, physicians in many states were fearful of being stranded without MPL coverage. This crisis inspired state and local medical communities to found mutual insurance companies that would cover the physicians in those specific states or regions.
Determined to avoid the mistakes of insurers who weren’t well informed about this specialty market, physicians involved with state mutual companies began to educate themselves. They worked together to form the Physicians Insurance Association of America (PIAA) in 1977, which became the MPL Association in 2017.
During the past half-century, the industry, the Association, and the companies that serve practitioners have evolved while preserving the essential founding spirit. In order for healthcare providers and healthcare organizations to serve patients, they must be protected in the case of adverse events. This is the essential task of the companies that operate in the MPL industry. The job of the MPL Association, then, is to protect and advocate for these companies as well as their customers and members, so that they can continue to safeguard healthcare providers and
organizations in America and around the world.
For Gloria Everett, president and CEO of The Mutual Risk Retention Group in Walnut Creek, California, the MPL industry occupies a crucial role within the healthcare system. “What we do is important to the delivery of healthcare,” she said. “The consequences of stress within the system for both providers and institutions translate to an inability to handle demand, which will impact the supply of providers in the future. As a society, we must advocate and support providers and institutions if we want the healthcare delivery system to work.”
The Founding of an Industry
Prior to the emergence of a distinct MPL industry, providers were insured by corporations that offered many other lines of insurance. These companies had no specific expertise or awareness of MPL events. This led them to settle many cases that could have been defended and
also created the crisis that led to their own exit from the industry when
claims and payouts rose to unsustainable levels in the early 1970s.
While the initial solution to this crisis was the creation of individual state mutuals or similar
organizations to insure physicians, the landscape has changed over the years. Many of the founding members have grown, insuring other types of practitioners and moving beyond state lines into regional or even national companies. Others have remained state-focused, while some have been merged into other companies. Commercial insurance companies and captives have arisen, offering coverage as the healthcare market has evolved and diversified.
The Mutual Assurance Society of Alabama, like other state mutuals, came into being as a result of the malpractice crisis that occurred in the 1970s. “The physicians who formed the company decided they were not going to do the same thing that commercial carriers had done, which was to settle claims to, in a sense, feed the tiger in hopes he would eat you last,” said Stancil Starnes, JD, executive chairman of the board of directors of ProAssurance in Birmingham, Alabama.
“They decided to defend the defensible claims. That’s what they set out to do, and they’ve
done it ever since,” he continued. “The Alabama company went through a bit of a metamorphosis. The name was changed from the Mutual Assurance Society of Alabama to the Medical Assurance Society of Alabama. The company began insuring hospitals, as many companies did across the country, in the late 1980s. In the early 1990s, the company became a publicly traded company.”
As a result of these many changes, as well as the entrance of other
companies into the MPL marketplace, healthcare providers have an
abundance of choice of MPL insurers in most states, creating competition
and transparency.
“MPL is a very unique area of insurance,” said Ed Amsler, chairman of the Board of Directors of MLMIC in Latham, New York. “We insure professionals treating patients at one of the most intimate times of patients’ lives. For those professionals and the organizations they work for, their reputation is important, as is their oath to do no harm. The result is a very different area of insurance from insuring trucks or cars. Insurers have concomitant responsibilities to both providers and patients; it is something we’ve done successfully for more than 40 years and that we continue to do today.”
The founding of the National Practitioner Data Bank (NPDB) in 1986 by the Health Care Quality Improvement Act established a mechanism for hospitals to query practioners’ past paid claim experience. The industry and the Association have worked with the NPDB since its beginning, according to Larry Smarr, former president and CEO of the Association.
Defining Industry Events
Once the crisis that created the original MPL mutuals passed, the physicians who were involved in these organizations were driven to learn about the causes of MPL events, said Everett. “Because physicians are excellent learners, they wanted to have access to and understand the
data behind MPL events, to understand how rates were developed and how claims were managed,” she continued.
This desire eventually resulted in the founding of the PIAA to facilitate collaboration, education and advocacy. One significant project for the organization was the formation of the Data Sharing Project, which was designed to understand the breadth and depth of medical errors that were occurring, according to Smarr.
“We set about to collect the data, and nobody had done that before; we were a pioneer in that area,” Smarr said. “There had been studies by the National Association of Insurance Commissioners that preceded our data-sharing project, and we actually built upon that to discern the clinical situations behind the claims. We needed to gather data to refute misinformation that others were circulating at that time about the nature of the industry and the average value of claims.”
For John Mize, President and CEO of SVMIC, market cycles are the most significant source of disruption within the industry. “Market cycles have defined the industry and are driven by the delay in knowing the real cost of coverage,” said Mize. “We sell insurance policies that cover events reported in the coming year, but some of those events won’t be resolved for 15 or more
years. That delay makes it difficult to know the actual cost of coverage.
“This uncertainty creates an immense amount of turmoil and drove the creation of many
of the MPL Association’s member companies,” he continued. “These companies have been a stabilizing force in the MPL market, and have provided access to critically needed MPL insurance for doctors, hospitals, and other providers. Yet, uncertainty is still a factor that drives swings in pricing and availability.”
Moving Forward Amid Challenges
To retain the founding spirit of the MPL community, companies, and the Association, staying connected with the original values behind the formation of the industry is critical.
“We need to make certain, as more and more healthcare is delivered by larger and larger organizations, that we do not lose the patient-physician relationship,” said Starnes.
“We also need to sustain the ability of the patient to trust the physician and providers involved in their care and to know that these providers are focused on the patient and patient care.”
“The industry, the Association, and the companies involved have evolved into a professional,
flexible and much more advanced business model,” noted Everett. “With those changes in
mind, we all must remain mindful of the fact that settling a lawsuit on behalf of an entity may not
seem to have the same consequences as it would in terms of settling a lawsuit on behalf of a physician or other provider. However, for providers involved in these claims, settling means the claim continues with them for the rest of their careers. We need to stay mindful of the humanity of this business and never lose that awareness.”
Amsler commends the industry, the MPL Association, and insurers for their ability to remain true to the founding spirit. “Essentially, when someone buys insurance, they’re buying a promise for the future, and we’ve lived up to the promises we’ve made. We not only defend providers in the courtrooms, but we also work through legislation and with other stakeholders to create and maintain a favorable environment for this important industry.”