Transcript Physician Malpractice Retention Program

HPR Insurance Services
SELF INSURED RETENTION FOR
MEDICAL MALPRACTICE
Presented by:
HPR Insurance Services
Healthcare Provider Resources, Inc.
Tom Otway, CPCU
18 Crow Canyon Ct.
Suite 225
San Ramon, CA 94583
800-878—9920
www.hprinsurance.com
Alania Sheeley, PAHM
7051 Highway #70 South
Suite 333
Nashville, TN 37221
877-520-9925
Joan Robnett
14900 Interurban Ave. S.
Suite 271
Seattle, WA 98168
888-834-4399
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Elements of Malpractice - Insurance
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Individual physician limits
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Medical Board hearing coverage
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Coverage for negligent acts or allegations of
malpractice
This policy provides the same coverage as any
other good medical malpractice insurance
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Elements of Malpractice - Service
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Ability to add physicians without immediate
charge
Group underwriting rather than individual
underwriting – no second guess of hires
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Grandfathered free tail
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Dedicated claims handling
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Risk Management Services
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Elements of Malpractice - Financial
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Financially this is very different from
traditional medical malpractice
Uses a Self-Insured Retention (SIR) which
works differently than a deductible
Uses an Aggregate Retention
Gives financial control to the group without
taking away coverage
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Differences
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We always view the group as a group and not
as an association of individual physicians.
Under this plan the group is insured, with each
individual physician having their own
individual limit of insurance.
With one insurance policy.
We underwrite the management, not the
individual physician.
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Goals of the Malpractice Program
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Reduce the cost of physician’s malpractice
insurance.
Provide exemplary service by simplifying the
process and insuring the group.
Use fluctuating market conditions to the
financial benefit of the group.
Align financial incentives to improve
malpractice loss experience and further reduce
premium.
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Basic Principle Number 1
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It makes no sense to trade premium dollars
with an insurance company. Do not give
money to an insurance company to pay
claims that are, statistically, likely to happen.
Any insurance company will want more
money coming in than going out, so the
premium will be greater than the amount of
the likely claims.
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Basic Principle Number 2
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The first dollar of insurance protection costs the
most. The final dollar of limit costs the least.
The insurance company knows that it will
probably pay out the first $1.00 of premium it
collects to settle claims. Therefore it will charge
much more than $1.00 for that first $1.00 of
protection.
With every additional dollar collected in premium
the insurance company is less likely to have to use
it to settle claims.
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Basic Principle Number 3
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The malpractice market changes. Sometimes
premiums are high relative to risk, sometimes
low. When premiums are high – increase the
amount of risk you retain. When premiums
are low – when insurance companies are
willing to “buy” claims – let them.
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Basic Principle Number 4
Claims have two parts:
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Claims management and litigation
management – requires a professional to handle
the claims and includes legal representation.
Claims payment –requires the ability to write
checks.
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Typical Deductible Program
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The typical physician malpractice deductible
program has a per-claim deductible.
For instance: with a $1,000,000/$3,000,000
policy, and a $50,000 deductible. The
policyholder would pay the first $50,000 of
each and every claim.
Some policies have an “aggregate deductible.”
At $2,000,000, for instance, this means that the
total of all the individual claim deductibles
could not exceed $2,000,000 out of pocket in
one year.
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Anticipated Annual Loss Level
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The first step is determining the anticipated
annual loss level for the group.
We suggest the use of an actuarial firm
much as Milliman.
For the purposes of this presentation we’ve
assumed that the anticipated annual loss
level, after trending and development, is
$1,000,000.
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Self Insured Retention
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If the anticipated annual losses are $1,000,000
we will suggest a $1,000,000 SIR (Self Insured
Retention).
The group needs to be able to pay those
claims when they are presented.
The group pays the first $1,000,000 of claims
and claims expenses – regardless of the source.
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Hudson Specialty
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Hudson Specialty Insurance, in exchange for premium
(which is much less than the cost of first dollar
insurance) pays all claims and expenses over the
$1,000,000 annually up to the individual policy limits.
Hudson provides each individual physician with either
a $1,000,000/$3,000,000 or $2,000,000/$5,000,000 limit.
Or a combination of limits within the same group
depending on specialty.
Hudson Specialty also handles all claims management
in consultation with the group.
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What Happens to the Money?
What happens if the group doesn’t use the entire
$1,000,000 to pay claims?
The group keeps the money, and interest.
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Physician Incentives and Loss Control
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Having physician money at risk and having the
opportunity to keep money that is not used for
claims has proven to be a tremendous incentive
to active claims and loss control management.
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Premiums and Adding or Deleting
Physicians
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Premiums are paid annually with some
financing available on the entire group.
Under certain circumstances the option
is available to add or delete a certain
number of physicians each year without
a premium charge.
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Tail Coverage
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It is possible to “grandfather” physicians that
have earned free retirement tail with another
insurer.
Tail coverage can be done on an individual
physician or “departed physician” basis.
Subject to the SIR or first dollar.
Retirement tail is available after age 55 and 1
year with Hudson, if the physician completely
retires from the practice of medicine.
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Service
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Certificates can be provided on each physician within
48 hours because the group is insured.
If the group’s credentialing process is approved –
additional physicians can be added without
underwriting or applications.
Quarterly reports are provided to the group showing all
activity (physicians added, terminated, locums, etc.),
current rosters, and latest loss runs.
There is a tremendous amount of flexibility in the
program that allows for a sense of group ownership.
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Next Steps
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Written approval to work with the interested
groups and Hudson Specialty.
Information collecting.
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Past loss information
Actuarial analysis
Physician Rosters
Entity Application
Options that include the interested groups or
the association.