Things are looking up, if only modestly so, for physicians in Ohio who have suffered through several years of double-digit inflation in medical malpractice insurance premiums.
A harbinger that malpractice strain may be easing for 38,000 physicians in Ohio, which remains on the American Medical Association's list of 20 med mal "crisis states," is that a new malpractice insurance carrier has entered the market, a physician-owned "bedpan mutual." Healthcare Underwriters Group Mutual of Ohio, headquartered in Columbus, was granted its certificate of authority by the Ohio Department of Insurance Dec. 14.
A few days later, it wrote its first policy to a two-physician internal medicine practice, according to Steve Salman, chief executive officer of the company.
"We already have 200 applications in," Salman said. "Our goal is 500 in the first 12 months. I think we'll go well beyond 500 in the first 12 months and if we do, our financial model will work."
The company is organized as a not-for-profit corporation. It will carry group reinsurance so physician policyholders will not be assessed for unanticipated losses. However, excess profits will be distributed either as dividend payments or as reductions in future premiums, subject to the approval of the state insurance regulator, according to the company.
Salman described the decision to start up a medical malpractice carrier in Ohio as something of a contrarian point of view, but he's banking on two things to make the venture successful: management experience and ownership by physicians rather than a publicly traded, for-profit corporation model.
"For us, I think it's the ideal time," said Salman. "We've put together a management team that's been in this industry for 25 to 30 years, and most have had experience in the Ohio market. I've been in this business 30 years. This is the third cycle (of skyrocketing premiums) that I've worked through."
"I think the public form is exactly the wrong form for a medical malpractice insurance company because you can't serve two masters," he said.
"We chose a model that's always been successful," he said, quickly adding caveats for mutuals that failed due to management mischief, the exuberant overextension of business into unfamiliar states and the unwise cutting of rates below costs in the face of price competition.
Tim Maglione, senior director of government relations for the Ohio State Medical Association, said the new mutual also has an improved regulatory climate in which to put down roots and grow, even though Ohio remains a crisis state on the AMA's list, "because we still have a number of physicians having a difficult time finding affordable coverage."
"After three years of (premium) increases ranging from 20 to 30 percent on average, we're looking at 10 to 15 percent on average,"Maglione said. "I see the signs pointing to a road to recovery."
Earlier this year, the state hospital association put together a medical malpractice insurance plan to cover physicians on behalf of its member, Maglione said, but a second, physician-owned and operated company in the market is a "positive development."
"We've had those kind of bed-pan mutuals in the state before, but not recently, so it's refreshing to see them coming back to Ohio," Maglione said. "And when you have new players in the market, that promotes additional competition and that should help as well. We passed some significant tort reforms over the past two years, and I think you're beginning to see some of the fruits of those in the market."
The reforms include caps on noneconomic damages of $350,000 that can rise to as high as $1 million if there are multiple plaintiffs and severe injury, he said. The state also established a requirement for any medical malpractice complaint to go forward, it must be accompanied by an affidavit from a physician that malpractice took place, he said.