Risk Retention Groups
RRG Pros & Cons:
New York has seen a proliferation of RRGs in the last few years. 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 a RRG? A 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, a RRG can insure members in all states. Because the LRRA is a federal law, it preempts 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
- Guaranty Fund Protection: Policyholders insured by NYS licensed carriers (such as MLMIC & PRI) are protected by the States $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; making it extremely important to find a RRG with strong financials and a conservative business model. The NYS Property/Casualty Insurance Security Fund (Guaranty Fund) provides a safety net protecting policyholders of NYS licensed carriers.
- 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 a 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.
- 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.
- Premium Savings: RRGs typically charge less than the standard premiums offered by NYS licensed carriers. In some cases, the savings can be substantial.
- 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.
- 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. It is important to check with your hospitals to see which RRGs are currently accepted. One of the primary benefits some physicians can expect from RRGs is a sometimes significant premiums savings. This is especially true in cases where physicians have an above-average claims experience, or other licensing/disciplinary issues. The list of RRGs offering coverage in NY is expanding, providing more and more options to NY physicians. In recent years, Risk Retention Groups (RRGs) have entered the NY market, offering competitive premium rates. As more and more hospitals in NY are now accepting physicians insured by RRGs, physicians considering MMIP, or those physicians who are not able to get insurance in the voluntary market can also consider their options with the various RRGs offering malpractice coverage in NY.