Is there a doctor in the risk retention group house? Indeed, there are plenty, as half of all RRGs formed in 2008 were established to provide medical malpractice insurance for physicians.
As a result, physician-owned RRGs now comprise nearly 40 percent of the total number of such alternative risk-transfer facilities in the health care sector.
In fact, the number of physician RRGs has risen dramatically over the last seven years. During the 15 years prior to 2001, a total of only 20 RRGs were formed to insure physicians.
In 2002, with the onset of the last hard market, physicians turned to the Liability Risk Retention Act as commercial insurers raised their premiums to exorbitant levels or stopped writing liability coverage altogether. As a result, from 2002 to 2008, more than 70 RRGs formed to insure physicians.
Surprisingly, even as the market turned soft in 2005, physicians continued to turn to RRGs to provide their medical malpractice insurance.
Most of the RRGs formed in 2008 to insure physicians have arisen from existing groups of doctors. While some of the RRGs will insure physicians in only one state, others plan to expand to multiple states.
Under the provisions of the LRRA, RRGs domiciled in one state can operate in other states, upon filing a registration application notifying nondomiciliary states of their intent to do so.
Of the nine RRGs formed in 2008 to insure physicians, four will provide medical malpractice coverage for physicians in New York, where the medical malpractice market continues to be in crisis. The state's residual carrier, the Medical Malpractice Insurance Pool, is running a total deficit of about $1.9 billion.
The motivation for physicians to form RRGs stems from a desire to control their own programs and achieve rate stability over the long term. Many doctors have learned this is not possible with traditional insurers, which in soft markets reduce rates, and in hard markets raise them–sometimes to unaffordable levels.
Another motivating factor is when doctors learn, typically through feasibility studies, that their loss experience does not warrant the rates they have been paying to traditional insurers. Insurers often lump them together with high-risk specialties, which means they are, in effect, subsidizing higher risk doctors.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.