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Physician Owned Malpractice Risk Retention Groups [RRGs]

By Dr. David Edward Marcinko; FACFAS, MBA, CMP™

[Editor-in-Chief]

 One new(er) method used to keep medical malpractice liability premiums low(er) may be specialty specific carriers, using Risk Retention Groups [RRGs].

In this business model, member physicians perform underwriting tasks, rate setting, and strategic operations. They also provide additional services, such as providing attorneys, medical risk and practice management experts; and are less likely to settle lawsuits, too.

History of RRGs

First prominent in the 1970’s, controlling more than 60% of medical malpractice market share and $ 6.1 billion in net premiums, RRG muscle dwindled in the 1990’s. RRGs however, seem to be making a comeback in 2008; according to proprietary iMBA Inc research studies www.MedicalBusinessAdvisors.com 

But there is a downside to physician owned liability insurers like RRGs. These include limited experience, reserve requirements, financial backing and a sparse but improving track record.

Current State of the Industry

Nevertheless, there are more than 51 specific sub-markets, and 40 so-called “bed-pan” mutuals, now serve orthopedic surgeons in Pennsylvania (Positive Mutual Risk Retention Group, Inc.), ophthalmologists in San Francisco (Ophthalmic Mutual Insurance Company), podiatrists in Tennessee (Podiatry Insurance Company of America), general practitioners in Illinois (Illinois State Medical Inter-Insurance Exchange), internists in New Jersey (MIIX Advantage Insurance Corporation), optometrists (Optometric Insurance of America) and chiropractors (Nationwide Chiropractors) across the country.

The Physician Insurers Association America, in Rockville MD, represents many of these RRGs and reports a membership combined-ratio which is a measurement of company viability of 141 – compared to an industry average of 154.

Actuaries suggest the figure should be closer to 125.*

The top five physician-owned medical malpractice mutual companies include: MLMIC Group, Doctors Company Insurance Group, Pro Assurance Group, Healthcare Indemnity, Inc., and the NORCAL Group. Laggards included neurosurgeons and OB/GYNs.

Assessment

A related new innovation for RRGs may be in the form of a tracking company, or system of medical providers to monitor and follow unhappy patients who are considered the most likely to sue.

Remember, liability underwriters and actuaries are risk-adverse by education and training. They react slowly, cautiously and incrementally to shifting risk factors; especially toward positive trends that might suggest reduced underwriter income and liability premiums.

Conclusion

Physicians, healthcare executives and medical group administrators must therefore develop their own strategies for evaluating liability risk factors, and lead the trend to reduced operational expenses through managed liability costs.

Perhaps this may be accomplished by RRGs in some cases?

And so, what experience do you have with this hybrid medical liability insurance machination?

Speaker: If you need a moderator or a speaker for an upcoming event, Dr. David Edward Marcinko; MBA is available for speaking engagements. Contact him at: MarcinkoAdvisors@msn.com

*Source: AM Best  

Filed under: Book Reviews, Professional Liability | Tagged: Malpractice Liability | 1 Comment »