Health care providers are required to carry a significant amount of malpractice insurance. The cost of this insurance, (i.e. $20,000 to $150,000 per year in annual premiums, depending on the specialty), placing significant strain on finances for small or independent providers and drives up the cost of health care for provider network and health care systems. .
Doc Source Inc. will work with medical specialty associations/societies (such as the American Urological Association) to create and manage Risk Retention Group Captives for their membership.
How does medical malpractice insurance work?
Most health care providers need to buy professional liability insurance. Nearly all
states require that physicians have liability insurance. Even in states that don’t, physicians usually
have to have insurance coverage in order to get privileges to see patients at a hospital. In some
contexts, however, physicians can choose to “go bare.” In Florida, for example, it is estimated that
about five percent of physicians carry no liability coverage.
Physicians usually buy their insurance from a commercial company or a physician-owned mutual
company, either individually or through a group practice. Hospitals and other health care facilities
purchase their own insurance, and hospitals that directly employ physicians typically buy a policy
that covers both the hospital and its medical staff. Physicians employed by the federal government
don’t buy insurance; if they are sued, the suit is brought against the federal government,
which insures itself. Some state-employed physicians receive coverage from the state.
Premiums for malpractice insurance vary with the provider’s degree of risk, but experience rating is not widely used. Insurers set premiums on a prospective basis based
on: 1) their expected payouts for providers in a particular risk group; 2) the uncertainty surrounding
this estimate; 3) their expected administrative expenses and future investment income; and 4)
the profit rate they seek. They use information on past losses and expenses, combined with other
information, to help them set rates.
Physician professional liability insurance does not work like auto insurance, which is generally
experience rated. When a motorist has a claim, his insurance premiums go up. Physician malpractice
premiums, by contrast, are usually priced according to the physician’s specialty and
geographic location only (some insurers also consider number of hours worked and types and
setting of work within the specialty). Experiments with individual experience rating have not
worked because physicians’ claims experience is too variable over short time periods, making it
difficult to produce an actuarially stable estimate of their risk.
For hospitals, some degree of experience rating occurs, but usually no more than 25 percent of
the hospital’s total premium is based on experience. Experience rating hospitals is more feasible
than experience rating physicians because hospitals’ claims experience is more stable over time.
Hospital premiums also vary with hospital location (e.g., urban versus rural) and the clinical services
offered (e.g., level of trauma care).
Value to the Association/Society
As membership in professional medical association continues to fall, organizations are looking for additional ways of providing value to attract and retain members. A significant savings on medical malpractice insurance is a direct, tangible, financial benefit to membership.
Lower Premium Costs to Health Care Providers
Building Owner/Member Value
Because of their specific organization, these Captives can offer lower rates, broader coverage, higher stability and access to reinsurance markets.
As Group Captives are member-owned, profits are retained by policyholders.
The Doc Source team has met with a number of specialty medical association boards who have expressed an interest in offering a program such as this to their membership.
Associations with Strong Interest and Good Fit
- American Association of Clinical Endocrinologists (AACE) — 6,500 members
- American Urological Association (AUA) — 13,500 members
- Endocrine Society — 9,500 members
- National Medical Association (NMA) — specific specialties (Approximately 54,000)
Owner, Investor and Professional Services Teams
Doc Source Accomplishments to Date
Formation of Delaware Corp (Doc Source Inc)
Formation of Insurance Captive (Physicians Choices Insurance Group)
In contract with Captive management team (JLT)
In contract with actuarial group (Bartlett Actuarial)
Contracted with legal firm (GF & M Attorneys)
Established capital surplus ($1.5 - 5MM in assets)
Established intent with initial specialty associations