By Vanessa Orr
Malpractice insurance is one of the largest expense items that health care professionals have, so it’s important to find ways to save money while still receiving the proper coverage. Purchasing groups, in which a group of doctors buy insurance together, have numerous benefits in addition to decreasing premiums.
“We’ve found purchasing groups to be one way that doctors can gain as much control as possible with their malpractice insurance,” explained Matt Gracey, medical malpractice insurance specialist at Danna-Gracey, the largest independent medical malpractice insurance agency in Florida. “Power purchasing really does work—just like any other thing you buy, if you have negotiating power, you can get it less expensively.”
According to Gracey, purchasing group members can save anywhere from 5 to 35 percent, depending on how big the group is.
One of the only forms of unification that doctors are allowed to do by federal mandate, membership in purchasing groups is still underused. “A federal statute allows for the creation of risk purchasing groups (RPGs) in the same statute that allows for risk retention groups (RRGs), which are basically small insurance companies,” said Gracey, adding that RRGs are more complex, much more regulated and require an investment of capital to create.
“The beauty of an RPG is that there’s no upfront capital needed so there’s no barrier to entry,” he added. “If a doctor wants to move his or her coverage from an RPG, there’s no barrier to exit either. It’s a very simple mechanism of unity for doctors to gain purchasing power.”
There are other advantages to RPG membership as well.
“We work very hard to improve the claims profiles of our members within the RPG, which is the key to long-term stability,” said Gracey. “If you have claims-ridden and challenged doctors in your group, you won’t get good rates and the group won’t last long. The key is to be selective about bringing in doctors with fairly good claims histories and working with each member to make sure that they have as few claims as possible.”
In an RPG, the relationship between the insurance carrier and the doctors changes as well. Instead of being in a vendor/buyer relationship, physicians become partners with the insurance companies to lower the possibility of claims being filed against them.
“There is an element of transparency within RPGs; insurance companies share their level of losses and loss ratio and discuss claims openly, though anonymously, of course,” said Gracey. “In a vendor/buyer relationship, you have no idea what the insurance company’s profit margin is; you don’t know what’s behind that curtain.”
Doctors who do have claims are sheltered from high rate increases as part of an RPG; while they may not pay the same rate as doctors without claims, they are still paying less than they would if rates weren’t being buffered by a larger group.
Fraser Cobbe, executive director of the Florida Society of Nephrology and the Florida Society of Orthopedics, manages purchase groups for both organizations. “From an association standpoint, purchase groups allow us to provide sustainable membership benefits that encourage doctors to belong to our organizations,” he said. “We already bring physicians together to advocate for issues and for the profession, and bringing them together to purchase an insurance product they need fits within our mission.”
“In addition to the premium decreases that members get by purchasing in volume, it also enables doctors to have a more substantial relationship with their insurance carrier,” he added. “It allows us to dive deeper into risk management issues; see what is creating claims against our surgeons and track trends in practice and documentation.
“We can sit down with the carrier and get tips on how to avoid situations that will result in liability claims against our members, which improves doctors’ risk profiles, which means lower premiums,” he added. “We avoid claims and provide better care from a patient perspective. It’s a win/win situation for everyone.”
By joining professional associations, members can take part in these purchasing groups, which can be a very wise investment. “Our membership dues are $275 a year, and this past year, our members saved $8,000 off their premiums,” said Cobbe. “It proves our value to them every year.”
So why doesn’t every doctor join a purchasing group?
“While there are good companies out there that welcome the opportunity to partner with physicians, many brokers and insurance companies don’t want doctors to unify because it gives more power to the purchasers,” said Gracey. “This is why