Correctional medicine has been continuously evolving over the last 40 years. Similar to the healthcare industry as a whole, there are many factors that contribute to this evolution, and there are many signs that point to this continuing well into the future.
One development that is unique to the correctional healthcare industry is the constant state of adverse losses experienced by the insurance companies that write the liability insurance. The current state of the market has produced unstable premiums, policy non-renewals, continuously increasing claim settlement amounts, and multiple carriers exiting the industry altogether.
In a recent discussion with the top insurer of the industry, we were told that the best advice we can give our clients is to “find a carrier that you know is committed to the industry.”
As more and more private correctional healthcare companies feel the financial burdens of a tightening market, it is imperative that the focus remains on quality Correctional Medical Liability Insurance. Hiring an experienced insurer, like HCP National, can be the difference between a claim and a catastrophic loss.
The focus of this briefing is to provide insight into the current state of the correctional medical liability insurance market. As always, a quick look into the past can help predict the future:
In 1976, the Constitution’s Eighth Amendment against cruel and unusual punishment was invoked in the ruling of the Supreme Court’s Estelle v. Gamble case. This ruling stated that all prisoners are entitled to adequate medical care while incarcerated.
The 1970’s also coincide with the war on drugs. Since its declaration, the number of nonviolent offenders in prison cells has increased by record numbers.
Couple that with mandatory minimum sentencing laws and a “Three Strike” policy, and you begin to see the ever-increasing rates of incarceration in America.
Over the last 40 years, prison populations have skyrocketed, and along with them, so too have the costs associated with providing adequate healthcare.
Generally speaking, there are two very different methods in which to provide healthcare to a prison population.
There are costs and benefits to each method; however, the increasing preference is to hire a private corporation to administer care.
In fact, as of today, more than 50% of all state and local prisons and jails have outsourced their healthcare to private companies.
As the purpose of this article is to inform of the current state of malpractice insurance for private companies, we will focus on the private model moving forward.
The outsourcing of healthcare to private companies reduces the state’s liabilities in two ways.
Firstly, it relieves the state from its long-term liabilities (benefits and pensions). If you recall, the medical personnel were employees of the state. Hiring an outside corporation to staff the prisons and jails alleviated some of those financial obligations.
Secondly, it transfers the malpractice liability from the state to the corporation. If an inmate sued due to poor quality of care, the corporations were responsible to carry malpractice insurance to cover their employees.
The malpractice insurance expense for private healthcare companies has been increasing steadily for quite some time. There are many reasons for this increase and when combined, the trend toward higher malpractice insurance premiums will continue.
Contracted medical services have grown rapidly, and as such, so too has the amount of care provided on a fixed fee basis. Some have suggested that the typical fixed fee structure in the correctional health industry has led to less than adequate care for inmates. Reduced quality of care has led to an increase in the number of claims reported. Both the overall number of claims as well as the settlement amounts has been increasing.
For many years, underwriters operated under the false impression that no jury would award an inmate a settlement larger than $1,000,000. This ignorant assumption led to low deductibles and low premiums. As the cases increased in severity and number, insurance companies have become unprofitable and are pulling out of the space entirely. Non-renewal letters are sent out as the carriers exit, and many companies are seeking new representation.
As with many other niche markets, the most important aspects of the insurance company that is writing the coverage is experience and long-term interest.
The carriers that are exiting the correctional medical malpractice space were not suited for the long-term exposures and their underwriters were not properly trained to price the business correctly. This caused an artificially low market value to be set for the cost of malpractice insurance premiums and what we are experiencing now is a much overdue correction.
Companies should expect to see an increase in premium, as well as an increase in deductible amounts moving forward. There are a handful of carriers that are committed to this industry and have the staff and finances to remain for the long haul. Malpractice coverage should be placed solely with an experienced carrier to avoid costly underwriting mistakes, contractual obligations, and future non-renewals.
Staffing companies face unique exposure in the changing climate of malpractice insurance. Many are unaware that if revenues generated from correctional exposure reach certain levels, the malpractice insurance company may not renew.
A company that provides staffing services to the correctional industry must remain diligent in tracking the exposure and revenues generated.
A switch from traditional staffing to primarily correctional may cause a large increase in insurance expense that was not anticipated.
Staffing companies face increased exposures which include the following:
Dentists
Nurses/PAs
Psychiatric
Medical
Staffing companies that focus on correctional care should also be wary of placing their malpractice insurance with an unprepared carrier. As stated above, slight changes in revenues can have a large effect on premiums and carrier availability.
Government Correctional Practitioners & Minority "Set-Asides" Credits
When it comes to Correctional Medical Liability Insurance, insureds can expect high premiums.
As one of the few certified minority-woman-owned insurance brokerages (WBENC & MBE) in the United States, HCP National offers more than just unparalleled expertise and customer service.
When correctional medical professionals choose to work with HCP National, some (or all) of their insurance expenses can be credited as minority “set-asides” for government work.
We can help you find the best correctional medical malpractice coverage for the best available price – while helping you to secure minority “set-asides” credits. Get in touch with HCP National today.
HCP National Insurance Services, Inc. is a full-service malpractice insurance broker with the experience and knowledge needed to properly insure your correctional healthcare company. Our highly trained staff and management have relationships with the largest and most utilized carriers in the correctional medical liability insurance industry.
Whether your focus is correctional medicine, mental health, or temporary staffing, trust the professionals at HCP National to properly market and place your coverage.
As the market encounters this current correction, private companies that specialize in correctional services should focus on the following:
Emerging data shows that a large number of correctional healthcare companies are realizing the market trends and are taking steps to combat them. If our clients can remain committed to patient safety, litigation management, and favorable contract language, we may soon see a change in the current underwriting practices and premiums will begin to come down.
HCP can help you find the best correctional medical malpractice coverage for the best available price – while helping you to secure minority “set-asides” credits. Get in touch with HCP National today.
