New York has seen a proliferation of RRGs in the last few years. Most physicians have received information and/or solicitations from various RRGs and brokers. RRGs can be a viable alternative for many physicians and medical groups. We suggest that physicians and/or practice administrators carefully evaluate their coverage options, understand the various benefits of standard carriers vs. RRGs, and select a plan that suits their needs.
Your medical malpractice insurance is one of the most important coverages that protects you and your practice. We are pleased to provide you with a comprehensive look at RRGs in NY, and we do hope that this will assist you in making informed, long-term decisions.
What is an RRG?
An RRG is a liability insurance company that is owned by its members. Under the Liability Risk Retention Act (LRRA), RRGs must be domiciled in a state. Once licensed by its State of domicile, an RRG can insure members in all states. Because the LRRA is a federal law, it pre-empts State regulation, making it much easier for RRGs to operate nationally. The Liability Risk Retention Act (LRRA) is a federal law that was passed by Congress in 1986 to help U.S. businesses, professionals, and municipalities obtain liability insurance, which had become either unaffordable or unavailable due to the “liability crisis” in the United States.
Key considerations for NY physicians:
1. Guaranty Fund Protection
Policyholders insured by NYS licensed carriers (such as MLMIC & PRI) are protected by the State’s $1 Million per claim guaranty fund in the event of insolvency of the carrier. However, RRG policyholders are not protected by the guaranty fund in case the RRG becomes insolvent. The NYS Property/Casualty Insurance Security Fund (Guaranty Fund) provides a safety net protecting policyholders of NYS licensed carriers.
2. Free Excess Coverage
Physicians who are insured by a NYS licensed carrier are eligible to get $1 Million of Excess coverage provided by the State. Excess coverage is currently provided at no cost to physicians who have primary limits of $1.3/$3.9M from a NYS licensed carrier, and who complete the requisite risk management course. Physicians are expected to have this application processed through their primary affiliated hospital. Physicians who purchase their primary coverage from an RRG are not eligible for the $1 Million of free excess coverage. They do, however, have the option to purchase higher limits of primary coverage offered by some RRGs to offset the lack of the free excess coverage.
3. Coverage Forms
NYS licensed carriers provide both types of coverage, Occurrence and Claims-made. Most RRGs provide Claims-made coverage, while only a handful offer both types.
4. Premium Savings
RRGs typically charge less than the standard premiums offered by NYS licensed carriers. In some cases, the savings can be substantial.
5. State Regulation
NYS does not regulate RRGs. RRGs can set their own premium rates, policy forms and claims handling practices, without filing for and requiring approval from NYS Department of Insurance.
6. Hospital Credentialing Requirements
Some hospitals do not grant staff privileges to physicians who are insured by an RRG. This scenario is changing rapidly, as many hospitals recognize the crisis some physicians face, and are accepting physicians insured by a few select RRGs.
One of the primary benefits some physicians can expect from RRGs is, sometimes, significant premium savings. This is especially true in cases where physicians have an above-average claims experience, or other licensing/disciplinary issues.