Program helps orthopaedic surgeons reduce medical liability insurance costs
In September 2008, after 5 months of negotiation and legal preparation, the New Jersey Orthopaedic Society/Orthopaedic Surgeons of New Jersey (NJOS/OSNJ) launched a medical liability insurance risk purchasing group. As a result, New Jersey orthopaedic surgeons who are members of the purchasing alliance received discounts of 7.5 percent (spine surgeons) to 12.5 percent (nonspine surgeons).
The program was negotiated by representatives of NJOS/OSNJ with MD Advantage, one of seven insurance companies that offer medical liability insurance in New Jersey. The company currently insures approximately 29 percent of all physicians in New Jersey and wanted to attract more orthopaedic surgeons. By working with the risk purchasing group, MD Advantage hopes to increase its market share. MD Advantage currently covers an estimated 250 orthopaedic surgeons in the state, including some who are not members of NJOS/OSNJ.
The program will also benefit NJOS/OSNJ by attracting new members to the organizations, which currently have 483 members. Membership in the NJOS/OSNJ is required for participation in the purchasing alliance. NJOS/OSNJ stands to gain 100 new members as a result of this program, more if surgeons switch to MD Advantage.
Negotiated discounts add up
The risk purchasing group has negotiated discounts that range from $4,639 to $9,685 on occurrence policies with $1 million/$3 million limits. The amount of the discount depends on the rating of the insured physician.
As a result of these negotiated discounts, orthopaedic surgeons in New Jersey will save $1.2 million to $1.5 million yearly.
Membership dues for the risk purchasing group, also known as the Medical Liability Insurance Purchasing Alliance (MLIPA), are used to cover legal and administration costs. Surpluses will be used to fund educational activities of NJOS/OSNJ, including annual fall and spring conferences and the “On The Road” program, which brings speakers to hosted meetings in different parts of the state.
Educational funding is an issue, due to the restrictions placed on grants from device manufacturers by the U.S. Attorney’s Office in New Jersey and federal monitors. The NJOS/OSJN is also looking at other ways to use any surplus funds, including improved member benefits and public education efforts.
How the MLIPA is governed
The New Jersey Department of Banking and Insurance has established requirements for creating a structured purchasing group. The NJOS/OSNJ legal counsel prepared the organizational documents, which were submitted to the department and approved. Board members of NJOS/OSNJ serve as the officers of the risk purchasing alliance and do not receive any salary or compensation. Board meetings are held in conjunction with NJOS/OSNJ board meetings approximately six times a year.
All members of NJOS/OSNJ can join the purchasing alliance, but MD Advantage makes the determination as to whether the individual meets its underwriting standards. Thus far, MD Advantage has turned down just 3 out of 195 applications.
Clearly, statewide risk purchasing groups will play a role in the future in providing medical liability insurance for orthopaedic surgeons—and orthopaedic state societies can play a key role in the formation of these groups. As malpractice costs rise in many areas, the bargaining power of a large group of providers can help level the playing field.
As of April 2009, the New Jersey MLIPA has 191 members, 61 of whom are new members to the NJOS/OSNJ. We anticipate attracting another 50 members as insurance renewals come due and look forward to becoming the largest state subspecialty MLIPA in the country.
Stuart J. Fischer, MD, is president of the NJOS/OSNJ and the New Jersey MLIPA. He can be reached at email@example.com
Editor’s Note: Last month, AAOS Now reported on the risk purchasing group (RPG) established by the Florida Orthopaedic Society and the Bones Society of Florida. This month, we feature the RPG established by the New Jersey Orthopaedic Society/Orthopaedic Surgeons of New Jersey.
View articles on establishing risk purchasing groups:
Setting yourself free with a “captive”
Setting yourself free with a “captive”—II
What can I do about my medical liability insurance?