In September 2003, 4000 Australian doctors turned out to protest skyrocketing insurance costs, highlighting the urgent need for government intervention to ensure affordable medical indemnity, thereby safeguarding the accessibility and sustainability of healthcare services.
The rally was held following the collapse of one the of the largest medical indemnity providers, United Medical Protection (UMP), and shaped much medical practice in Australia to this day. While the rally was a landmark event, it was the culmination of years of incremental concern about medical indemnity, an issue which is back on the agenda today.
The history
Former AMA president Dr Andrew Pesce recently presented at a meeting of societies convened by AMA (NSW) about the issue of indemnity. Prior to the 1990s, he explained, doctors were rarely sued, and professional indemnity was offered by state-based medical defence organisations (MDOs). Dr Pesce said in 1993, when he started in specialist obstetric practice, his premium was $400 per year.
Over the course of the 1990s, the environment changed and there was a significant increase in the frequency and size of claims against doctors. The AMA responded to increasing concerns by establishing a Medical Indemnity Taskforce which considered legislative and other reforms, such as a Lifetime Care and Support scheme for people suffering catastrophic injury.
Dr Pesce said that by 2000, significant risk premiums had been imposed on specialties such as obstetrics, neurosurgery and orthopaedics, and is own premium had increased to $40,000 per annum. Despite significant premium increases, indemnity insurers were still at risk of insufficient funding for claims likely to emerge in future years.
Dr Pesce said that at the time, state and federal governments saw this as a ‘doctor problem’, not an issue the needed to get involved in. Instead of seeking to deal with the issue of how injured Australians were provided necessary care and support, governments focused on how the civil claims system worked, and ensuring medical indemnity insurers had adequate funds available to cover all likely claims against their doctor members.
They made indemnity insurance mandatory for all doctors, a requirement which has now been transferred into national law. State and federal governments also forced insurers to stop funding cover on the basis of collecting premiums to cover claims notified in that year – and instead made them collect sufficient funds to cover all claims incurred, even if not notified.
This, combined with the collapse of insurance company HIH, a major reinsurer for many MDOs in 2001, meant most MDOs were made technically insolvent and UMP, Australia’s largest MDO, was placed under administration.
AMA (NSW) CEO Fiona Davies remembers the time well.
“Looking back, it was extraordinary remembering doctors fearful of losing their homes and most doctors in NSW having to pay an additional year of premium to stay in practice,” she said.
“Twenty years later, I can still recall the distress.”
The federal government had, up until this time, assumed commercial insurers would come in and take over the problem. They didn’t, leaving doctors potentially uninsured and withdrawing from services and the federal government with a significant crisis on its hands.
Dr Pesce said the AMA was able to negotiate significant reforms, including that the federal government offered a guarantee to MDOs to allow them to continue to operate, the establishment of the High-Cost Claims Scheme, the Premium Support Scheme and Run Off-Cover Scheme, which provided premium affordability and allowed doctors to retire without having to continue to pay excessive premiums.
These hard-fought benefits achieved by the AMA remain to this day.
Medical indemnity back on the agenda
Fast forward to today and indemnity is back on the agenda AMA (NSW) president Dr Michael Bonning said the body is again being approached by concerned members, who describe increases to premiums in higher risk specialties and surcharges placed on insurance as particularly concerning.
In the 2024 renewal period, AMA (NSW) received more feedback from higher risk specialties such as neurosurgery and bariatric surgery that premiums had again increased significantly.
Dr Anne Rasmussen, anaesthetist and AMA (NSW) councillor, said she is seeing doctors move out of sub-specialties or change their practice due to indemnity costs. She said this had real life implications for patients and access to services, especially in smaller regional areas.
A spokesperson for leading medical insurer Avant said: “We operate in an environment of stability where insurers are well capitalised, higher regulated by the Australian Prudential Regulation Authority and affordability is well supported by government schemes.”
“We can’t speak for the rest of the industry, but Avant’s average rate increases have been below CPI for the last few renewal cycles. Some limited specialties have experienced double digit increases but this reflects significant increases in the frequency and severity of claims and represent less than 1% of our member base.”
As well as the increasing cost of indemnity, the AMA is concerned about a shift in the nature of claims, and the understanding of what is a reasonable and appropriate level of care.
Dominique Egan, AMA (NSW) director of workplace relations, said: “While many more claims are settling for understandable and appropriate reasons, including the distress that accompanies litigation, this means there is a lack of transparency regarding the settlement sum and the components of the settlement sum.”
Dr Bonning said the AMA was focused on the viability and sustainability of the indemnity system because it matters for doctors and patients. Dr Bonning said as governments found out in the early 2000s, doctors will change the nature of their practice due to risk. They will limit services in higher risk areas and consider whether they will provide services to private patients in public hospitals, all of which can impact access to care.
AMA (NSW) CEO Fiona Davies said the message to all doctors, new or established, was that they should not take their current situation for granted.
“Those wins were hard fought and they need to be maintained. That is the ongoing role of the AMA,” she said.
Key issues AMA (NSW) is considering
- Should there be more oversight regarding the setting of premiums and the pricing of risk in a mutual environment?
- Should the profession be considering other schemes such as no-fault claim schemes?
- Is the role and conduct of expert witnesses adversely impacting on settlements and claims?
- Have the criteria for the payment of settlements changed in a way which could adversely impact safe clinical care
This article originally appeared in the Autumn 2024 issue of NSW Doctor (link here). Republished courtesy of AMA (NSW).