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Physicians in New York face more malpractice exposure than those in any other state. The state's second-largest insurance company is struggling to stay above water as risk retention groups (RRG) continue to experience rapid growth. Physicians' Reciprocal Insurers (PRI) is in the red due to these shifts in the medical malpractice market and its connection to a federal corruption case. PRI's liabilities surged to $138 million more than its assets, which spells danger for hospitals, doctors, and customers alike.
The Future of Medical Malpractice Insurance in the Age of Rising Claims
The future of PRI is important because it is one of five insurance carriers paying into a guaranty fund that acts as a safety net in case one of these companies defaults on benefit payments or becomes insolvent. If one of these companies goes under, the costs are passed along to the other state insurers. If these unpaid claims cannot be paid by the insurance companies, then the responsibility is passed on to the policyholders, affecting the cost of providing medical services.Ellen Melchionni, president of the New York Insurance Agency, has said, "Allowing a medical malpractice insurer to operate in the red is terribly risky." During a time when the industry is facing such a serious availability crisis for many types of coverage and the cost of private insurance is skyrocketing for doctors and patients, who can they turn to for a solution?
New York Market Restrictions Contribute to the Problem
The market restriction in New York is forcing doctors to search for cheaper alternative insurance, and that's where the out-of-state insurers, risk retention groups, come into play. Congress enacted the Liability Risk Retention Act in 1986. It was originally designed to enable companies to obtain affordable and attainable liability insurance and to increase competition in the insurance market."In the last 10 years...I think we probably [domiciled] two or three RRGs in, say, six or seven years. Now all of a sudden, here it is one year, and we're doing 11. It's the availability of insurance. It's just tougher to get, the prices are higher," Leonard Crouse, director of Captive Insurance in Vermont, said.
The Benefits of Risk Retention Groups Over Standard Medical Malpractice Insurance Providers
RRGs present a lot of advantages that traditional insurance companies don't. They offer much-needed liability when it seems there aren't any other options. They're an attractive alternative also because they don't charge as much and they don't have to pay into the guaranty fund. Karen Cutts, publisher and managing editor of the Risk Retention Reporter said, "Another key benefit RRGs can bring to insurance buyers is long-term stability. This allows policyholders to get coverage at more predictable rates than they can from their traditional counterparts.Although RRGs have a lot of benefits that set them apart from state insurance companies, there are a few faults to consider, like the absence of a guaranty fund. But Robert Esenberg, president and CEO of States Self-Insurer RRG, points out that "based on the number of RRGs and the number of insurance companies, there have been very few failures by RRGs. I think as long as you're careful and selective in who's going to manage the affairs of the company, and that the board that is selected by the membership maintains good vigilance on what's going on, I think that RRGs are extremely sound and financially beneficial."If this is the case and more doctors are flocking to the security of RRGs, then the top-five New York carriers are in trouble. "Of the 63 medical malpractice RRGs in New York, 16 have domiciled since 2012," Dan Goldberg of Politico wrote in a recent article about the shift in the medical malpractice market.
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