ETHIQAL NEWS

The impact of NHI on medical malpractice insurance
Published: 23 April 2024

EthiQal Team

South Africa is at the cusp of a significant transformation in its healthcare system with the proposed National Health Insurance (NHI) bill. The NHI bill was approved by the National Council of Provinces on 6 December 2023 and is now ready for Presidential signature, despite much criticism and objection, particularly with regard to its constitutional issues, its system design, the role of medical schemes, and the financing and governance of NHI. The bill also raises questions around the future of private professional indemnity insurers since the bill is silent on the subject of indemnity. It is unclear how this will work under the NHI, or if the state will accept liability for services performed by private sector practitioners. In the current system, the State indemnifies public healthcare providers, but with the implementation of the NHI, the line between public and private healthcare may blur, potentially impacting the landscape of professional indemnity insurance.

FAnews spoke to JP Ellis, Head of Legal &
Claims at Ethiqal about the challenges and
opportunities that lie ahead for insurers operating
in this dynamic environment.

The intricacies of the transition

The transition of medical malpractice risk from the public to the private sector, according to Ellis, presents a challenging landscape for professional indemnity insurers. “Currently, the situation is somewhat unclear, and predicting the exact impact is difficult. The absence of explicit provisions for insurance arrangements in the bill may be seen as a lost opportunity to address the intricacies of the transition.”

“The Department of Health has acknowledged that many operational issues not covered in the bill will be addressed through regulations associated with the legislation. This suggests that specific details regarding the role of professional indemnity insurers, coverage requirements, and other related matters may be clarified in subsequent regulations,” stated Ellis.

The impact on professional indemnity insurers, he said, will likely depend on the specifics outlined in these regulations. “Insurers may face uncertainties regarding the scope of coverage needed, the allocation of responsibilities between the public and private sectors, and the overall risk landscape. Adequate communication and collaboration between regulators, healthcare providers, and insurers will be crucial to navigating this transition successfully.”

Challenges in managing malpractice claims

Private insurers, according to Ellis, may find themselves under increased pressure as they may be required to take on a portion of the medical malpractice risks that were previously borne by the state.

“The contingent liability of medico-legal cases across the provincial health departments stood at R77 billion in March 2023. Most of the claims are birth-related and include brain damage, cerebral palsy, caesarean sections, and non-standardised procedures. The cumulative total value of all 15 148 claims made against the Department of Health during the 2021-2022 financial year stood at R125.3 billion, with 96% being for medico-legal claims. Altogether, R1.8 billion was paid out for medico-legal claims in 2021 and R855.7 million in 2022,” stated Ellis.

“Currently, due to constraints posed by the Public Finance Management Act, the state is unable to allocate a separate budget for medico-legal claims or obtain insurance coverage for such exposure. Consequently, this results in a challenge where the health budget for a given year is not solely dedicated to healthcare delivery, as funds are also earmarked for settling medico-legal claims and court awards,” he added.

According to the South African Law Reform Commission discussion paper 154 (October 2021), it noted that “legislative intervention alone cannot address the myriad of challenges faced by the public health sector. As is often said, there is no claim without negligence.
Legislation can address procedure, establish bodies to deal with some issues, create interventions that do not currently exist, alter the method and timing of compensation and so forth; but legislation cannot address systemic problems with leadership, governance, management, budgeting and procurement, quality of care, lack of skills, personnel shortages, training, attitudes of staff and maintenance
of facilities and equipment.”

Most of the underlying issues in the state sector, according to Ellis, relate to systemic issues and unfortunately, “lawmakers missed a crucial opportunity in not integrating an effective strategy, such as budgeting and insurance for the handling of medico-legal claims within the broader framework of the NHI. This could have been an opportunity for the state to reduce its exposure and possibly include a potential role for private medical malpractice insurers in managing and financing such a system. The lack of clarity and proactive measures in the legislation creates uncertainty for private insurers in navigating their role and responsibilities in the changing landscape of medical malpractice claims.”

Premiums and coverage – a bone of contention This shift, according to Ellis, could lead to a stark re-evaluation of premiums, coverage terms, and overall risk management strategies within the professional indemnity insurance sector, since the risks in public and private sector have been very different. “The increasing burden of medical malpractice claims could place substantial pressure on private insurers to accurately assess and price the risk associated with the public sector.”

“The potential impact is crucial for both healthcare practitioners and patients, particularly in the context of an overstretched public healthcare system and the escalating trend of legal claims. Insurers may find it necessary to adjust premiums to reflect the heightened risk environment, potentially leading to increased costs for healthcare providers seeking professional indemnity coverage. Moreover, the
coverage offered by insurers may undergo revisions to ensure that it adequately addresses the evolving landscape of medical malpractice
claims for a newly combined public and private sector. Insurers might introduce more stringent terms and conditions or explore innovative solutions to mitigate risks effectively,” he said.

“There is a bone of contention regarding the assurance provided to doctors concerning protection against professional liability. South Africa must establish a framework within the NHI that assures doctors of adequate protection. It is also crucial for South Africans to recognise healthcare providers as a national asset, with their role being pivotal to the realisation and success of universal health coverage. The ongoing dialogue between regulatory bodies, insurers, and healthcare practitioners will be essential to strike a balance,” continued Ellis.

Striking a balance

Ellis mentioned that the goal would be to strike a balance between ensuring ethical standards, protecting patients, and fostering innovation that can lead to improved healthcare delivery and more sustainable medical malpractice insurance practices. “A shift towards more transparent and standardised indemnity structures may be encouraged, providing clarity for both insurers and healthcare providers.”

Ellis believes Public-Private Partnerships (PPPs) are key – “to ensure the sustainability of professional indemnity insurance in the face of changing healthcare paradigms, insurers should actively collaborate with healthcare providers and policymakers. Engaging in open
dialogues, participating in the development of healthcare policies, and fostering partnerships with healthcare institutions can create
a collaborative environment that promotes the long-term viability of professional indemnity insurance in the evolving healthcare
landscape.” “This collaborative approach allows insurers to gain insights into the specific challenges faced by healthcare providers, stay informed about changes in healthcare delivery models, and tailor their insurance offerings to align with the evolving needs of the industry.
Additionally, working closely with policymakers enables insurers to contribute their expertise to the formulation of regulations and
policies that strike a balance between protecting healthcare practitioners and maintaining the sustainability of professional indemnity
insurance,” added Ellis. “By actively participating in these collaborative efforts, insurers can not only adapt to the changing healthcare paradigms but also play a proactive role in shaping the future landscape of professional indemnity insurance, ensuring its continued relevance and effectiveness in providing protection for healthcare providers and maintaining the integrity of the healthcare system,” he concluded.

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