September 2024 
The Difference

Long-tail insurance involves claims that may be made long after the end of the insured period. The claims traditionally involve a claim period that can be several years long. Short-tail claims are often resolved close to the occurrence that triggered the necessary coverage. Statutes of limitations vary by state and circumstance surrounding the claim; a general rule is that long-tail insurance business claims take a year or more to resolve, while a short-tail claim can be resolved in a year or less.

Standard, or Physician, new business submissions route to Standard Underwriting when the submission has a gross primary premium that is less than $2M or has exposures in no more than two bordering states in a single Standard Underwriting region. New business submissions that are appropriate for routing to Specialty Underwriting include multi-state exposures in three or more states, multi-state exposures in two or more Standard Underwriting regions; accounts generating $2M or more of gross primary premium; accounts on Excess and Surplus lines; and accounts that are not physicians.

Soft markets are typically classified as times when the insurance industry sees losses stabilize and profits become more secure. Rates also traditionally decrease, and new carriers will enter the market. This creates price-based opportunities and increased competition. The medical professional liability market entered a soft market cycle in 2005 and saw the longest soft market cycle until COVID-19 shut down courts in 2020. A hard market cycle has attributes of less available insurance, tightening policy conditions, and increasing premiums. Rates increase to help minimize loss and maintain reserves; unprepared carriers who entered in more favorable conditions may exit the market; and coverage options decrease as policy conditions tighten. Medical malpractice claims can take years to resolve.

In the lifespan of a claim handled by any insurance company, there are cumulative costs known as loss adjustment expenses (LAE). Some LAEs are general and do not apply to a unique claim, while others are specific to a certain claim. Industry standards define expenses as allocated or unallocated. Examples of allocated loss adjustment expenses (ALAE) include claim-specific investigation costs, expert witness fees, and billable attorney fees. Unallocated loss adjustment expenses (ULAE) examples include claims personnel salaries and general office expenses.

MPL companies are ranked by their scale—market share at the national, regional, and local levels. There are very few MPL specialist companies at the national level (ProAssurance being one of them), but a majority of carriers dominate in their home state and only very occasionally write accounts elsewhere. There are a few companies trying to grow at the national level, but they may be at a disadvantage because they are up against the “can do vs. have done” comparison. Established national carriers have placed business in all 50 states, have decades of claims experience all over the country, and have specific (or tailored) products for different specialties, large healthcare entities, emerging medical procedures, etc. When choosing a carrier, it is important to consider whether they have a filing in a state to provide a certain kind of coverage; you also need to consider the depth of experience they have managing that type of business to help ensure a quality experience for the insured.

Publicly traded companies need to meet a higher standard of conduct due to additional regulatory requirements and become inherently transparent for consumers. With more transparency, a consumer can feel more confident in selecting a carrier, and an agent can be more comfortable when advising a client. Insurance companies owned by publicly traded companies also have additional financial capacity to weather market cycles due to more flexibility in accessing capital markets, investment banking opportunities, and other financial industry relationships. Publicly traded insurance companies also have a diversified board of directors. ProAssurance has physicians as well as legal and financial representation on its Board. There is also investor accountability. With this level of accountability, institutional investors are proficient in evaluating the business operations and performance of companies in their portfolios. This leads to investors having the ability to dig through financial statements and build valuation models. It also gives ProAssurance the chance to answer questions with transparency.

This is a program that provides excess medical liability insurance coverage for eligible healthcare providers. The patient compensation funds are supported by surcharges on the underlying coverage and vary state to state.

From the August 2023 issue of ProVisions.

The greatest differences between admitted and Excess and Surplus (E&S)—or non-admitted—lines are the amount of regulation, the flexibility in writing policies, and the level of state involvement in guaranteeing coverage. Admitted insurance companies are licensed and authorized by each state’s insurance department. They are subject to all state insurance regulations and must be filed for specific rates, rules, and forms that can be used. E&S carriers are able to draft their own insurance contracts and do not submit their forms and rates to state regulators for approval. E&S carriers are required by many states to only write a policy if it has been rejected by admitted insurers. Carriers must meet certain financial and regulatory mandates in each state, and these requirements typically include the establishment of substantial surplus or demonstration of adequate reinsurance. States also require E&S carriers to disclose in the policy documents that the company is not covered by the state’s guaranty fund, and that their rates, rules, and forms have not been reviewed by the state’s insurance department.

Occurrence policies cover incidents that occur during the policy period regardless of when they are reported. Tail coverage is not needed and is reflected in the higher premium charged for the coverage. However, the buyer’s coverage is restricted to the limits purchased during the policy period. A claims-made policy covers incidents that are reported or made during the active policy period. This includes on or after the retroactive date and before the policy expiration date. Tail coverage needs to be purchased to provide continuous protection for incidents reported after the policy expiration date.

Patient compensation funds (PCF), joint underwriting associations (JUA), and guaranty funds are several resources managed by states to support stakeholders in the medical professional liability market. A PCF is state operated and provides excess medical liability insurance coverage for eligible healthcare providers. A JUA is a nonprofit risk-pooling association that is established by a state legislature in response to an availability crisis in specific types of insurance coverages. A guaranty fund is a state fund assuming responsibility for payment of covered claims to protect policyholders from “financial losses and delays in claims payments due to the insolvency of an insurance company.”

The primary differences between a risk retention group (RRG) and a risk purchasing group (RPG) are who bears the group’s risk and how they are regulated. Both groups are limited to placing liability coverage. A mutual RRG is a liability insurance company that is owned by its members. The NAIC describes RRGs as “allowing businesses with similar insurance needs to pool their risks and form an insurance company that they operate under state regulated guidelines.” An RRG bears the liability risks of the group’s members. RRGs operate under the applicable laws and regulations of their state as well as the federal Liability Risk Retention Act (LRRA). An RRG can also write directly in a non-domiciled state without obtaining a license by completing a registration process. An RPG is a group of insureds engaged in similar business or activities authorized to purchase insurance coverage from a commercial insurer. RPGs are traditionally formed to pool purchasing power of their members to negotiate favorable terms with insurance carriers. Because RPGs operate as purchasing entities under LRRA but not as insurers themselves, they are also not subject to state insurance laws.

The difference between shared limits and separate limits is how these options determine how the coverage limits of the policy are available to its individual insureds. Separate limits allow the entity, each insured, or both to have coverage up to the full limits of the policy. Shared limits typically mean having a single limit covering the organization and the individual insureds on the policy.

The Annual Baseline Self-Assessment (ABSA) is the online assessment created by the ProAssurance MPL Risk Management team for a medical practice. The results are benchmarked, and the practice then receives a customized report showing areas where the practice is excelling and opportunities to improve. The Loss Prevention Seminar, or LPS, is an annual risk management program offered to ProAssurance insureds for CME and premium discounts. This material is changed every year.

Incident Date: The day the alleged injury, death, or adverse event occurred. This can also be known as the occurrence or accident date. This is what leads to the individual’s complaint or claim.

First Notice or First Notice of Loss: The traditional first step of the claims process and concerns the first report made to the insurance provider after the claimant’s alleged loss. It should be noted that this is not a lawsuit or demand of monetary recovery but an alert of potential claim.

Claim: Unless defined otherwise in an insurance policy, a written or oral demand for compensation (money or services) made by a patient or patient representative for a perceived damage or loss.

Lawsuit: In the MPL space, a complaint or action initiated by a patient or patient representative and filed in the respective court system that demands recovery of damages for a perceived damage or loss.

Doctors of medicine (MD) and doctors of osteopathic medicine (DO) receive the most extensive training among healthcare professionals. They both have the same responsibilities and privileges in treating patients, can prescribe medication, and can practice independently. Each receives a four-year undergraduate degree, attends four years of medical school (MD) or college of osteopathic medicine (DO), and completes three to seven years of residency training after receiving a medical degree. Some MDs and DOs also go on to fellowships to train in a specialty. 

Both MDs and DOs diagnose and treat acute and chronic illnesses. Where they differ is in their approach to medicine. An MD focuses on the diagnosis and treatment of diseases, observing symptoms, and treating them directly. While a DO uses some of those same methods, they take a more holistic approach, considering the entire body system, nutrition, and everyday environment as factors in patient health. A DO must also take additional hours of training in the skill of osteopathic manipulative treatment (OMT) to learn how the bones, nerves, and muscles work together and influence health.¹ 

Advanced practice provider (APP) is a broad category rather than a specific medical license. APPs include physician assistants (PAs) and advanced practice registered nurses (APRNs), among others. The roles of the different APPs are similar and often overlap with physicians, although their duties such as prescribing privileges and practicing independently vary by state. Depending on the specific APP license, the education requirement could be as short as six years (a bachelor’s degree and a master’s degree).² 

Physician Assistant (PA): PAs have extensive medical training to diagnose illness, develop and manage treatment plans, prescribe medications, perform procedures, and serve as a patient’s primary healthcare provider. Most PAs have a four-year undergraduate degree and an additional two to three years of postgraduate education. They often work on a team of physicians and have a degree of independence in their practice. They can meet with patients independently but must always consult with a physician regarding patient care including treatment plans, prescribing, and when performing procedures.¹ 

Advanced Practice Registered Nurse (APRN): An APRN is a registered nurse with additional education, training, and certification. They obtain a Master of Science or doctoral degree as well as advanced clinical training and a specialty certification. As a registered nurse, an APRN can perform any of an RN’s roles and (depending on the state) some roles more traditionally reserved for MDs or DOs, such as diagnosing and treating patients, prescribing medication, and serving as a patient’s main healthcare provider. The full scope of practice for the various APRNs depends on state licensing regulations. For example, some states require the supervision of a physician to prescribe medication, while in other states they can prescribe medication and practice independently.¹ 

The four APRN specialties are:³ 

• Certified Nurse Practitioner (CNP) 

• Certified Registered Nurse Anesthetist (CRNA) 

• Clinical Nurse Specialist (CNS) 

• Certified Nurse Midwife (CNM) 

Licensed Practical Nurse (LPN) and Licensed Vocational Nurse (LVN): LPN and LVN are interchangeable as to their roles but have different titles based on state regulations. Both have the same level of education—about a year of nursing education—and generally perform less technical skills than do registered nurses or APPs, including tasks like taking vitals and observing patients under the supervision of a registered nurse or physician.^1,3 

Registered Nurse (RN): An RN obtains a four-year nursing degree and has passed a licensing exam. They can provide direct patient care in inpatient and outpatient settings and are often in charge of monitoring patients, taking vital signs, administering medications, and documenting patient history.¹ 

Doctor of Dental Surgery (DDS) vs. Doctor of Dental Medicine (DMD): DDS and DMD are equivalent degrees. Dental schools determine which degree is awarded, but both degrees use the same curriculum requirements and perform the same range of services. Education levels required to become a DDS or DMD include three or more years of undergraduate education and four years of dental school.⁴ 

Doctor of Podiatric Medicine (DPM): Podiatric doctors focus on examining, diagnosing, and treating issues that affect the lower extremities. They can perform surgery and prescribe medication and medical devices. A podiatrist’s education and training require a doctoral degree and residency. Some also choose additional fellowship training.⁵ 

Doctor of Chiropractic (DC): Doctors of chiropractic treat the neuromusculoskeletal system and focus on the body’s ability to self-heal. They study similar subjects, earn a doctoral degree, pass a board exam, and obtain a license to practice. Doctoral programs include supervised hands-on experience.⁶