Part 1: Thoughts on the Types of Med Mal Carriers for an Introspective Insured
If you have spent any time dealing with medical malpractice insurance in New York state, you know two things:
- First, New York is home to some of the most obscenely expensive medical professional liability insurance in the country.
- Second, there is a politically charged, financially driven battle waging for dominance over the medical malpractice insurance market in the state.
Doctors in New York have experienced some of the highest medical malpractice insurance premiums in the country for years, with some specialty classes paying upwards of a quarter million dollars for a solo doctor. Until several years ago, doctors had two main options; the admitted carriers MLMIC and PRI.
Doctors who could not obtain coverage with either of these companies were obligated to obtain coverage in the state’s insurance pool, MMIP due to the fact that excess and surplus lines carriers are, aside from a small loophole, not allowed to sell policies in New York.
Opportunities for Medical Malpractice Insurance in New York
Seeing an opportunity, Risk Retention Groups (RRG’s) started moving into the state of New York in the early 2000’s. Risk Retention Groups are governed under federal statutes, not state regulations. Ergo with a single state of domicile, they can write policies in any state they choose without being technically “admitted” in a state. However, without being a “state admitted carrier” RRG’s are unable to tap into a state’s insurance guarantee fund, which would normally partially subsidize the obligations of a failed or insolvent admitted carrier.
In New York’s case, MLMIC and PRI are the only carriers that have access to the guarantee fund. However the term “guarantee” may be considered misleading in a situation where the guarantor is financially upside-down. The 2011/2012 New York state budget projects a deficit of more than $8.2 billion. Some have suggested that the failure of either of the admitted carriers would ultimately drain the guarantee fund to the point where its obligations to doctors could not be met.
New York Doctors Can Find Relief
Seeking relief from high New York medical malpractice insurance premiums many doctors over the last several years have been moving to the RRG market. RRG’s operate in a similar fashion as a mutual company where the doctors are part owners of the insurance company. As opposed to the company trying to stay solvent while also attempting to earn a profit for investors from the doctor’s premiums, RRG’s price their products solely to stay fiscally sound. Since the owners of the company are doctors and there are fewer investors or non-physician shareholders to pay, the goal of the company becomes exclusively focused on sustainably low premiums.
Ultimately this translates into a premium savings of 15%-25% from New York’s admitted carrier rates. This savings is obviously attractive to the doctors who have been weighed down for years by the high costs of coverage in New York.
Due to additional layers of complexity drawn from a dynamic political landscape carved by elected officials, hospitals, and the carriers posturing for position in New York, there is no blanket answer as to which type of carrier is better for a doctor. Each specific medical practice requires a review of several current factors and potential future decisions. Such a review could translate into an opportunity for a doctor to save tens of thousands of dollars on his or her coverage or serve to reinforce the decision to stay with a specific type of carrier. Finding an impartial expert who is well seasoned in the New York medical malpractice insurance market is the first step in determining the proper course of action.