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A Guide to Healthcare Insurance: Part 3 – Assembly Bill 35

In the third installment of a three-part series, PCF Healthcare Practice Leader Brian King discusses legal changes and the impact of Assembly Bill 35.

Welcome to the third chapter of our series on healthcare insurance. In this segment, we examine a landmark change in the healthcare legal arena—Assembly Bill 35 (AB 35), a critical piece of legislation that has redefined the rules of the game for healthcare professionals and their insurance policies.

Need to catch up? Check out part one and part two before continuing!

As a PCF Healthcare Practice Leader, my journey has involved a meticulous examination of AB 35, assessing its far-reaching implications for the healthcare community. AB 35 signifies a fundamental shift in the way healthcare professionals need to approach their practice, patient interactions and risk management strategies. Its nuances and intricacies have a direct bearing on the financial and legal aspects of healthcare delivery.

In this part of our series, we aim to unravel the complexities of AB 35, exploring how it alters the fabric of medical malpractice insurance and the steps healthcare facilities and professionals should take to navigate this new terrain effectively. And while Assembly Bill 35 only affects California directly, many state legislatures have passed similar bills (see Colorado).

Understanding AB 35 and Its Ripple Effects

AB 35 signifies a significant transformation in California's medical malpractice framework, reminiscent of the reforms seen in the late 1970s. The legislation notably increases the cap on non-economic damages, such as pain and suffering, from the longstanding $250,000 to $350,000, which escalates to $500,000 for wrongful death cases. Additionally, these caps will incrementally rise each year, with wrongful death caps increasing by $50,000 annually for the next 10 years, followed by a 2 percent increase thereafter. For other non-economic damages, the annual increase will be $40,000 for 10 years, followed by a 2 percent increase thereafter. (Office of Governor Gavin Newsom, May 2022)

Another critical change is the allowance for separate lawsuits against different entities in the same case. For example, a medical facility could be sued for $300,000 and a physician for an additional $500,000 in a wrongful death case, substantially increasing potential claim amounts. This escalation alters the litigation dynamics significantly.

Additionally, AB 35 impacts how much attorneys can claim from damages, allowing for a higher percentage from larger settlements. This incentivizes attorneys to pursue more cases, potentially leading to an increase in litigation in the healthcare field.

This trend isn't isolated to California. States like New Mexico, Florida, Colorado and others are experiencing similar legal shifts indicating a possible nationwide trend that could redefine the medical malpractice arena.

Impact of Healthcare Law Changes on Insurance

The effect of bills like AB 35 on medical malpractice and facility insurance varies. AB 35 focuses on monetary damages, particularly non-economic damages, and could be seen as a "correction" of the law. But other legal changes might compel physicians to modify their practice or billing methods. AB 35 marks a significant event in its focus on monetary aspects of medical practice and litigation.

Staying Compliant with New Healthcare Standards

Healthcare providers should be familiar with the term “standard of care.” Take advantage of any help your insurance company may provide regarding clinical risk management. They may provide help free of charge. However, given the developing legal landscape, revisiting your risk management strategies is recommended. These services are sometimes essential, especially for busy healthcare settings where the medical director is tasked with these responsibilities.

Effective use of excellent electronic health records (EHR) systems is also crucial. These systems provide guidelines for accurate charting, a key defense against lawsuits. Having solid risk management, either in-house or contracted, is essential. Firms like Medpro offer valuable services, including compliance seminars.

Standard of care, critically, also hinges on adhering to common practices in your area and maintaining up-to-date training and best practices for each procedure. Regular review of patient consent forms with your attorney and insurance carrier is vital to ensure clear communication of risks involved in any procedure.

Attention to detail in patient care and documentation is paramount. Missing key aspects can lead to significant issues, especially following a negative outcome or perceived negligence.

Future Trends in Healthcare Laws

As we look toward the future, the exact trajectory of healthcare laws remains uncertain. The courts' interpretation and enforcement of these changes will be crucial. Many insurance carriers are seeking rate increases in light of these legal shifts, but there's a current stand-off, especially in California, where rate increases are being met with resistance.

This standoff has led to insurers exiting the market, reducing competition. While policy filings may still permit adjustments in coverage, the lack of competition means rates could stay constant, with underwriters becoming less likely to offer discounts or "credits," which can impact the affordability of insurance policies.

That being said, it's imperative not to renew insurance policies without careful review. Consulting an insurance professional well-versed in medical malpractice insurance to assess your coverage's comprehensiveness and alignment with the latest legal changes is crucial. While seeking cost savings is natural, medical malpractice insurance is an area requiring robust coverage to help protect your business, reputation, license and legacy.

Embracing Healthcare in the Wake of AB 35

As AB 35 redraws the boundaries of damages that can be assessed to providers and their practices, it is imperative for healthcare providers to stay ahead of the curve, armed with knowledge and the right insurance coverage. Let's embrace this shifting environment with a commitment to excellence and protection, aiming for the highest standards of care and helping to safeguard the pillars of our healthcare system.

As we forge ahead into this new chapter of healthcare, remember that staying informed and prepared is key to navigating these changes successfully.

Is your healthcare practice ready for the challenges and opportunities of this new legal era? Connect with a PCF Healthcare insurance professional to review if you're well-equipped for the future.

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