Five steps to reducing your current premiums

Even if you haven’t considered alternatives to your current medical liability policy, hundreds of other physicians have moved well beyond the consideration stage. According to a 2005 article in The Wall Street Journal (“Doctors’ Creed: Insure Thyself,” Aug. 17, 2005), the size of the alternative medical liability market is between $9 billion and $18 billion—out of a total market of $30 billion in premiums.

“Health-care providers have set up hundreds of so-called risk-retention groups, captive insurers and other entities to meet their malpractice-insurance needs,” says the article. Being charged with writing this article has convinced me that this is the year I’ll find a viable alternative to the traditional medical liability insurance I’ve had since I started practicing.

I started by reading my current policy. My cursory reading generated more questions than answers, including the following:

• Do I really need all the “promises” I’m purchasing each year?
• Do I really need to pay to insure a “legal entity” that doesn’t practice medicine?
• Do I really need “first-dollar” coverage? How much could I save if my medical liability policy, like the rest of the insurance I buy, had a deductible?
• How much does the death, disability, or retirement (DDR) benefit cost, and do I really need it?
• Is an “unlimited duration” tail policy really necessary? How much could I save if it just covered the statute of limitations for my typical patient?
• Do I really need an unlimited defense benefit? If the plaintiff secures a credible expert against me (In my home state, the expert needs to have the same credentials as the defendant and must be practicing, teaching or in a bona fide research study within the defendant’s specialty), does it make sense to cancel office hours and surgeries to “fight” a case I’ll likely end up settling?
• Is this search for a quality alternative risk financing option even worth it?

Your reading may generate a similar list. Once you’ve assembled your list of questions, the following five steps will take you through the process of finding an alternative and determining if it’s right for your situation.

Talk to your agent
Schedule an appointment with your medical liability insurance agent—assuming you have one—and ask him or her the questions you’ve developed from reading your own policy. Your list might look very similar to mine. Ask the agent for a “premium indication” for a policy with no coverage for your professional corporation, with the largest deductible available, with defense costs “inside policy limits” (the agent may say this is wasting limits), with no DDR clause, and the “extended reporting period factor” (how much it will cost for a tail policy) for a two-year tail…should you decide to purchase one. Your agent will probably look very disturbed, reflecting some hybrid of consternation, confusion, and outright disbelief.

Talk to attorneys
Talk to some of your community’s most trusted medical liability defense attorneys. These attorneys will have worked with several insurance providers. Ask them which companies they know that can provide you with viable alternatives to your current medical liability insurance provider (assuming your current provider couldn’t provide you with a satisfactory alternative based on your questions to its representative).

When talking to others, remember that attorneys and certified public accountants are often “down on” what they are not “up on.” If your community’s best medical liability defense attorneys are not “up on” alternative risk financing options, they may be “down on” the whole idea.

Tap into your memberships
Assuming you’re a member of your local medical society, ask the executive director for the names of all quality medical liability agents who can provide “alternative risk financing” options for your medical liability insurance.

If your local medical society hasn’t identified any alternative sources for one of your largest and most distasteful annual expenses, ask why they haven’t pursued this issue and when you can expect a list.

Assuming you’re also a member of state, national, and specialty medical societies, start contacting them and make the same request for agents. You pay annual dues to all of these organizations. Put them to work answering your questions. Do not take “no” for an answer. They work for you…not the other way around.

You may find that some of these groups have “endorsed” a specific medical liability insurance carrier—for which they may be handsomely funded—and figured that was all they needed to do.

Ask around
Talk to your peers. Chances are that someone will know someone who knows someone who can provide viable alternatives to your current commercial medical liability insurance policy.

Be advised, your peers—not having considered this alternative themselves—may first regale you with horror stories of a friend-of-a-friend who was swindled by someone promoting “offshore” insurance. If they do, respond by asking them the following questions: How long ago did this happen? How did the friend-of-a-friend wind up with that agent? What has been their personal, recent experience with alternative risk financing?

Do your homework
Research any agent to whom you are referred. Type their name into a Web search engine and see what you can find. Inquire with the Better Business Bureau, your state’s independent insurance agents’ society, and your community’s medical liability defense attorneys. The more places the agent’s or agency’s name pops up, the more information you should be able to gather.

J. Michael Maxwell, MD, is a board-certified orthopaedic surgeon practicing in Adrian, Mich. Mark A. Tisdel is a principal with Backus Payne & Associates LLC, medical-liability specialists, in Lake Orion, Mich.

Editor’s note: This is the second in a two-part series on steps you can take to reduce your medical liability insurance premiums. View the first article, on the provisions of a standard medical liability insurance policy.

What about risk retention groups?
In 2007, nearly $3 billion in premiums were paid to physician-owned and operated Risk Retention Groups (RRGs), which were created under the Federal Liability Risk Retention Act of 1986.

RRGs, risk purchasing groups, and captive insurance companies are neither new nor uncommon. In fact, at least 30 states now offer “domestic domiciles” for captive insurance companies (companies that insure only their owners, making them “captive” to the owners). Vermont hosts the largest number of domestic captives.

Two Web sites that can be excellent reference sources are Captive.com (http://www.captive.com/ ) and the Risk Retention Reporter www.rrr.com). Risk Services LLC (www.captive.com/RiskServices) is one the nation’s largest risk retention group management companies.

These organizations can help you get started, but you must first understand exactly what you currently have and what policy features you think you can do without. Listen to what the alternative risk financing experts have to say. Don’t try to tell them their business. Listen, ask questions, and determine if their answers satisfy your needs.

Did you know?