Professional Liability

The Promise of Telemedicine

Ease of access and limitations on usage make this game-changing health care delivery method a popular choice for patients and a palatable risk for underwriters.
By: | May 2, 2017 • 6 min read

Talk to a hospital risk manager in the Midwest and they will say this: “We don’t have enough beds and providers to deliver adequate mental health services to wide swaths of the population.”

Now add in the access issues faced by rural residents to health care services in general. Or the fact that many providers do not take Medicaid patients. Or consider the risk of transporting a combative, fearful autistic child to the doctor’s office; or the fear of attack that a health care provider confronts when treating a potentially violent prison inmate.

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Telemedicine — the ability for a medical provider to consult with a patient in a video conference — seems to present the cure for these societal ailments.

Its use is taking off like a rocket. The global telemedicine market is expected to be a $35 billion industry by 2020. Just two years ago, according to industry studies, there were approximately 20 million telemedicine consultations. That number is expected to increase to about 160 million — an increase of 700 percent — by 2020.

“We’ve been pretty heavily involved in the telemedicine arena for five years now and have seen exponential growth.” — Danny Talley, director of voluntary benefits, HUB

“We’ve been pretty heavily involved in the telemedicine arena for five years now and have seen exponential growth,” said Danny Talley, a Denver-based director of voluntary benefits with HUB.

Talley said ease of access and the fact that many minor afflictions, from colds to skin rashes, can be addressed in a teleconference are some of the keys to that growth.

The approach also lends itself well to mental health treatment, where talking through an issue with a licensed therapist in a video conference closely approximates a face-to-face visit.

At the very least, said Talley, a video conference with a caregiver can help to assess someone’s mental health and determine whether a face-to-face meeting, or some other intervention, might be necessary.

“With psychiatric care, the bulk of it has to do with talking to the patient, asking them questions,” said Njoki Wamiti, a vice president with IronHealth, the health care division of specialty underwriter Ironshore.

“In my opinion, I don’t think it makes that much of a difference. Whether it’s via a video or one-on-one, you are still having the same conversation,” she said.

Larry Hansard, regional managing director, Arthur J. Gallagher & Co.

“A full 50 percent of our clinical encounters have been in the realm of mental health services. This in part relates to the challenges of a serious shortage of mental health providers in the rural areas of our state,” said Dr. Karen Rheuban, a co-founder of the University of Virginia Center for Telehealth. Last year, the center was renamed the Karen S. Rheuban Center for Telehealth in honor of Rheuban’s work to expand health care opportunities through telemedicine.

“In most circumstances, a high quality video conference comports with the standard of care in mental health,” she added.

But as we assess potential liability in this field, let us not confuse a telephone conversation with a video conference conversation. When it comes to establishing a verifiable doctor/patient relationship, they are two very different things.

Rheuban said the Commonwealth of Virginia and the Drug Enforcement Administration have weighed in on the prescribing of Schedule II through Schedule V psychotropic drugs in the absence of a prior in-person visit.

“We are concerned about the risk of establishing a doctor-patient relationship with a telephone encounter alone that results in the prescribing of controlled substances,” she said.

The UVA program offers telehealth services across the health care continuum, from prenatal to palliative care, to acute care, consultations, follow-up visits and remote patient monitoring. It offers live video-based visits and store forward technologies.

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As an example, ophtalmologists with the UVA program have trained community providers to obtain retinal images that are sent to them to screen patients with diabetes for retinopathy, the No. 1 cause of blindness in working adults.

Arthur J. Gallagher Regional Managing Director Larry Hansard, who suffers from frequent upper respiratory infections, recalled his own experience with telemedicine. “The physician looked at my throat via the real time video capability on my smartphone,” Hansard said. There was a prescription waiting for him at the drugstore in 10 minutes.

Compare that experience with having to wait days for an appointment, then taking off from work, driving a half hour or more, waiting to be called in to see the doctor and then driving back to the office.

“Why haven’t we been doing this forever?” Hansard asked.

Minimal Loss History

Telemedicine is growing quickly, so its loss history has yet to be well-established. As things stand, more than 70 percent of telemedicine interactions are for fairly common conditions.

“We are not seeing high-severity-type claims, most of the telemedicine usage we are currently seeing is for low-severity illnesses,” said Hansard.

The loss statistics that are available for telemedicine professional liability losses support Hansard’s statement.

“Licensure is the big risk for telemedicine providers, as they attempt to match a patient with a physician licensed in the state in which the patient is seeking care.” —  Larry Hansard, regional managing director, Arthur J. Gallagher & Co.

A 2015 report from the Physician Insurers Association of America revealed that of 94,228 medical professional liability claims in the PIAA’s Data Sharing Project (DSP) for the years 2004 through 2013, 196 claims were connected to telehealth.

The average indemnity loss for a telehealth claim was $303,691, compared to $328,815 for all MPL claims within the DSP.

“Licensure is the big risk for telemedicine providers, as they attempt to match a patient with a physician licensed in the state in which the patient is seeking care,” Hansard said. Many health care insurers will exclude coverage for a claim if it’s proven that the provider was not licensed in the same state where the patient received care.

Imagine a scenario where a patient is a passenger in a car that crosses the state line between Texas and New Mexico and is talking to a telehealth provider on the phone. If the provider is licensed in Texas, but not New Mexico, and there is an adverse event, the claim might not be covered.

“There are so many scenarios where people could cross state boundaries while on a telemedicine exchange,” Hansard said.

Hansard said most telemedicine providers are using smart technology so that they can track patients. But some aren’t.

“Some of the telemedicine providers are relying on older technology and they take the patient’s word for where they are located at the time of treatment,” Hansard said. “This could lead to problems if the patient misrepresents their location and the physician is not licensed in that particular venue.”

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Hansard looks at the international use of telemedicine optimistically.

Imagine you are a supervisor on an oil rig in Venezuela. If you had the opportunity, would you rather consult with your doctor back in Texas via a teleportal, or have a face-to-face consultation with someone you don’t know as well.

“I understand that there are certain countries that will grant a U.S. doctor automatic privileges in those countries,” Hansard said. “If that’s true just imagine the possibilities for some of these telemedicine companies to set up shop there.” &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

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“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

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Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]