The New Jersey State Board of Medical Examiners (BME) recently fined a medical group more than $23,000 for carrying a medical malpractice insurance policy that provided coverage which was inconsistent with N.J. regulations. Specifically, the board levied the sanction after, “it was revealed that the practice only afforded $1,000,000 of total coverage for both physicians due to the fact that both physicians treated the same patient*.” As the market for medical malpractice insurance remains oversaturated – filled with models purporting to be immune from state regulations – practices may want to think twice before accepting the cheapest bid.
In many states, the respective departments of insurance require insurance companies to be “admitted” in that state to sell policies. The process for becoming admitted generally requires companies to file financial information and all of their underwriting guidelines, and receive state approval, before writing business. This process can be long and sometimes costly, so some carriers will instead look to find exceptions to justify operating without obtaining admitted status.
The N.J. BME is sending a message that, even if an insurance department’s powers to police non-admitted insurance companies are limited, a medical board can still exercise its authority over physicians. Expect this trend to continue, and expect other states to follow suit.
To protect themselves, practices can simply obtain coverage with admitted insurance companies. In the alternative, physicians should understand all applicable regulations issued by both the Department of Insurance and the applicable medical board.
Historically, insurance departments have permitted physicians to insure with non-admitted carriers only if they cannot find comparable coverage or if comparable coverage is too expensive in the admitted market. Risk retention groups (RRGs), formed under federal law, assert that they need not comply with various state laws to operate, so physician groups can insure with them directly. This view was recently shared by the US Court of Appeals, Second Circuit, in Wadsworth v. Allied Professionals, RRG, which held that NY could not enforce one of its insurance laws against an RRG, as doing so would “thwart the efficient interstate operation of risk retention group.” Even if the insurance departments are “satisfied” with coverage, the recent BME fine demonstrates that medical boards may not be.
Given this recent fine, practices should ensure that their limits of coverage are sufficient. This may not be as simple as looking at a certificate though; practices must understand how the limits operate.
Another area of concern going forward might be related to policy-type and reporting features. Claims-made and reported policies require physicians to report adverse incidents before the expiration of the policy term, or lose coverage for claims that may arise from such incidents. These policies have long been disfavored in healthcare, but may be offered by non-admitted markets or RRGs.
“Written demand triggers” require a physician to submit a demand for monetary relief from a patient before a company will cover a claim. These policies are also disfavored in healthcare, as the time between an adverse event and a written demand can be years.
If the N.J. BME has started a trend, we may see an increase in fines and perhaps even new regulations to further transfer enforcement of insurance requirements from insurance departments to medical boards. With the insurgence of new and often risky insurance models, physicians who think they are getting good deals may actually be getting far more than they bargained for.
Brian S. Kern, JD, is an Area Executive Vice President with Gallagher, the nation’s largest broker of physician professional liability insurance.
* N.J.S.A. 45:9-19.17 (a): A physician who maintains a professional medical practice in this State and has responsibility for patient care is required to be covered by medical malpractice liability insurance issued by a carrier authorized to write medical malpractice liability insurance policies in this State in the sum of $1,000,000 per occurrence and $3,000,000 per policy year…
Related Event
When: Wednesday, June 25 to Thursday, June 26, 2014
Where: The Union League of Philadelphia, Philadelphia, PA
Learn More: http://www.americanconference.com/ObMal