To add to insurers' woes over rises in general damages costs, the Government is seriously considering charging insurers the £1bn cost of treating accident victims on the NHS, as Mike Cooper discovers….
People who suffer an accident at work, home or inside a shop have always been treated free of charge by the NHS. But this could dramatically change if the Government accepts a Law Commission proposal to recover the £1bn cost of NHS treatment from negligent parties and by implication their insurers.
It could result in an insurer, who provides public liability cover to a shopkeeper, having to reimburse the NHS for treating a member of the public injured on his premises. The same scenario applies to employment liability insurers in the case of staff hospitalised following workplace accidents.
The development is not as new as it sounds.
Since the introduction of the Road Traffic Act 1998 last April, motor insurers have been obliged to meet the "reasonable" costs of treating road traffic injuries on the NHS
Roger Snook, claims manager at the Motor Insurance Bureau which administers the industry's agreement for uninsured drivers, brands the proposal "naive". He says charges for NHS treatment have added an average £1,000 to each motor accident case, meaning increased costs of up to £400,000 for the 40,000 cases handled by the MIB each year. He cites as an example the sum of £5,000 as the cost charged by the NHS to treat a motor accident victim's broken arm.
"What the Law Commission is suggesting is compulsory third party insurance. It's a naive proposal that will increase litigation and insurance premiums," says Snook.
He indicates the MIB is becoming less inclined to offer a settlement if the proposal is made law because the added NHS care costs would make it cheaper to defend the action in court.
"It would also be a serious disincentive for the public to seek non-compulsory cover such as public liability insurance."
The ABI seems to think the Government will accept the Law Comission's proposals and seek to extend the scheme for recovering NHS treatment costs from non-motor insurers. An ABI spokesman says: "It is difficult to argue in legal terms that there should be any difference between a motor accident and any other kind of liability."
He says the 1998 RTA measure is estimated to have cost motor insurers an extra £125m a year.
This compares to the Law Commission's estimate of £1bn for the total cost of NHS accident treatment each year. However, it says the actual amount collected by the NHS would depend on the system used. By its own figures, £120m would be raised if only 12% of accident victims were successful in negligence claims.
Although the ABI appears to accept the inevitability of NHS treatment charges, it stresses that it expects the Government to consult the industry fully before considering the added claims cost.
The Law Commission recommendation has, however, remained dormant in the Government's in tray since its publication last November.
High costs unfairly met?
But, a report sent to ministers last week by the Bar Council has resuscitated the proposal.
It says the high cost of NHS treatment is unfairly met by the taxpayer.
Matt Kelly QC, the report's author and chair of the Bar Council's policy committee, says: "We are simply asking for a simple change in the law, enabling local authorities and the NHS to recover the full cost of treatment and care. We estimate total savings from our proposal of £100m."
He says: "This is not a tax on insurers, it is asking the wrongful party in a civil proceeding to meet the cost of the claimant's NHS treatment costs."
But the measure clearly has social exclusion implications since Kelly insists non-insured negligent parties will be expected to contribute too.
"If an individual has opted out of the insurance system, he will have to meet the costs out of his own pockets."
In its report Damages for personal injury: medical, nursing and other expenses, the Law Commission asked should the NHS be allowed to recoup its expenses where treatment is provided free of charge?
The Law Commission in its report says there is a strong argument in legal principle for the NHS to be able to recover more of its treatment costs.
It claims the current balance between injured and negligent parties and the NHS is out of kilter. Negligent parties are being "unjustly enriched" at the expense of the NHS it says, as by providing free health care it is discharging part of the negligent party's liability.
The Law Commission's solution is to give the NHS "restitutionary rights" against the negligent party to enable it to recover its outlay.
Already, private medical insurers and individual carers are able to claim care costs from defendants as a result of their negligence.
The law reform body does acknowledge that its proposal goes against the grain of the NHS's duty to provide services free of charge.
It says: "It may be said that regardless of legal principle and analogous rights, the NHS recoupment would be pointless because it would involve recovering money from those who contribute to liability insurance for the benefit of taxpayers who fund the NHS, when these two groups significantly overlap."
In other words, people face being charged twice for access to the NHS, once as taxpayers and again as insured parties through their insurance premiums.
But the Law Commission rejects this defence of the status quo and instead argues that there is a "benefit" in burdening insurance premium payers in favour of all taxpayers because this confines the cost of compensation to those who benefit from activities leading to negligent liability.
Another fundamental point of principle is whether any of the income raised from the scheme will actually be handed to the NHS or delivered directly into Treasury coffers and spent on other parts of the welfare state.
Will NHS benefit?
It is also unclear how the NHS will recover its costs. The department of social security currently has a role in recovering from defendants, benefits paid to claimants injured in motor accidents. The scheme is administered by the Compensation Recovery Unit in Newcastle, and applies to compensation payments in excess of £2,500 and almost all social security benefits paid to claimants for five years following the date of their accident. However, the Law Commission says: "It would be unacceptable to require some people to pay for NHS care, even if they had the right to get their money back, when for others treatment is entirely free". But it endorses the CRU as a model for an agency to collect care costs from negligent parties, after their victims have been awarded damages.
A spokesman for the department of health says it is "considering carefully" the Law Commission's proposals and the Bar Council's submission.