UK: Commercial Insurance - February 2011 - NHS Charges

With significant public sector budget cuts, Peter Forshaw considers insurance industry concerns of a possible extension to the existing NHS Injury Cost Recovery (ICR) scheme in personal injury claims and the likelihood of any changes.

The Health and Social Care (Community Health and Standards) Act 2003, amended by the Health Act 2006, extended the scope of recovery of NHS hospital treatment and ambulance charges, which until that point had only been recoverable in motor claims. Since 29 January 2007, compensators have been required to repay such charges in respect of any successful claim for compensation, particularly in relation to employer's liability and public liability claims, save for certain limited exceptions such as disease claims.

There is of course an apparent unfairness in making compensators responsible for reimbursing such charges in a no-fault National Health Service. If a patient turns up at hospital for treatment arising out of his own carelessness or fault, the treating hospital does not invoice that patient for the treatment received. It is therefore questionable why a tortfeasor should be treated differently. This of course is not a view taken by the Department of Health (DH), or indeed claimant firms such as Thompsons, who openly supported the principle of recovery from compensators during the 2006 consultation process.

The current scheme has clearly had a major financial impact on insurers and compensators. The original January 2007 tariff figures have steadily increased year on year, in line with Hospital & Community Health Service inflation. Indeed, the 2008 tariff figures saw an 8.3% rise on the previous cap (albeit this was the first increase since 2006). The recently published statistics from the DH show that in 2009/2010, £182million was recovered through the scheme. The current tariff figures, implemented on 1 April 2010, as set out in figure 1, have the potential to add further sizeable, amounts to any compensation claim and of course, unlike some CRU payments, NHS charges cannot be deducted from a compensation settlement figure.

Fig.1.

The concern for some insurers and compensators at present is that, with significant budget cuts, and continuing operating pressures on the Health Service and other public funded bodies, will the scheme be expanded to recover greater sums from those found to be at fault in a greater range of cases than at present? Currently, the scheme does not allow for recovery in disease cases and for example does not allow for recovery for GP care, the air ambulance, or peripheral home visit charges, arising from a tortfeasor's negligence. The fear is that were the ICR scheme to be extended in any of these ways, the floodgates could open to a wide range of associated recoveries, such as the costs of treating an asbestos-sufferer in a hospice. Back in 2006 it was estimated that expansion of the scheme would require compensators to pay back an additional £150m per annum (£175m at today's tariff figures), i.e. an additional 5% in claims spend. In light of these amounts, any further expansion of the scheme would suggest recoveries even higher than these figures, to be borne by insurers and other compensators.

However compensators should take comfort from the published statistics since the expansion of the scheme in 2007. The recovery statistics for 2009/2010 compared to 2005/2006 (the last before the current scheme was introduced) show an increase in liability for insurers of just £61m, well below the projected estimate of £150m per annum at the time of implementation. Consequently, the financial impact of the expansion of the scheme in 2007 was far less than had been feared. Any further expansion would probably have the same effect. Further comfort can be found in the current assurances of the DH that "There are currently no plans to extend the scope of the current scheme". Even if any significant changes were afoot, it is likely that the required legislation would take some time to come to fruition, as witnessed by the lag between the 2003 Act and the implementing regulations. Consequently any significant change to the ICR scheme in the foreseeable future appears highly unlikely.

That is not to say that there will be no modifications at all going forward, beyond the inflationary increases. There are 2 areas where modest changes may be made in the next year or so, which could result in increased liability to compensators. The DH reports that delays in internal paperwork being completed within the required timeframe mean that NHS charges cannot be claimed from the compensator where the deadline is missed. Current internal efficiency drives are likely to lead to greater compliance with paperwork submission and therefore recovery of NHS charges in a greater number of cases than at present. However the increase should not be overplayed, with the DH estimating that only 2% of cases involve potentially recoverable charges which cannot subsequently be reclaimed due to delays, so the impact of any improved efficiencies is unlikely to be significant.

Another possible extension to the scheme concerns the expanded concept of patient choice and elective care, where public money is used to reimburse independent sector treatment providers such as minor injury units and walk-in centres. Given the definition of 'NHS treatment' under the scheme legislation, such independent sector treatment may not currently be recoverable. This is something that the DH will consider reviewing. The 2003 Act did establish the framework for such recovery but it was not advanced at that stage. Secondary legislation to include it would result in such treatment charges being recovered in a greater number of cases than at present.

Whilst significant changes to the current ICR scheme, with consequential hikes in reserves and premiums, cannot be ruled out completely, the prospects of any wholesale changes in the foreseeable future appear extremely low. However a combination of the annual increases and internal efficiency drives is likely to see scheme recovery in a wider range of personal injury claims going forward than at present, and compensators will need to take these changes in to account when setting both premiums and reserves.

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