Frequently Asked Questions Q. What is MDIC? A. MDIC will be a fully functional insurance company in the form of a risk retention group (RRG). As an RRG, it will be owned by its policyholders, that is, you. So, it will be your company. Q. What are the pros and cons of a risk retention group? A. Pros First, you don't have to shoulder the burden of residual market mechanisms such as MMIP in New York. This can be a significant drag on the admitted carriers. MMIP deficit gets allocated to the admitted carriers. Second, you don't have to shoulder the burden of any other carrier's insolvency. Third, the risk retention group has more freedom as to the rate it charges. Therefore, if it's formed by a group of doctors who are likely to experience lower losses than what's assumed in the commercial carrier's rate, the members can realize a significant savings over time either as returned profit and/or lower premiums. Cons You don't get the guaranty fund protection if the risk retention group becomes insolvent. This is only fair if you think about it. You don't help pay for the others' unpaid losses, so the others won't help pay yours if your RRG goes under. This is why you need competent and conservative management. Q. Will MDIC offer an occurrence form policy? A. No, they will not. As explained below, the occurrence form is generally more desirable than the claims made form only if you assume your insurance company will be around when it's time to pay your claims. However, this assumption proved to be wrong far too often as evidenced by a number of recent insurance company insolvencies. Also, from an insurance company management perspective, it's a lot harder to maintain enough solvency margin writing occurrence form policies. Remember MDIC will be owned by you. You don't want to jeopardize its solvency by writing occurrence form policies. Q. Is there a situation where the claims made form gives me better protection? A. Yes. If our economy goes into a period of higher inflation next several years, you may get caught with an insufficient policy limit when an incident gets reported years from now. Under an occurrence form policy, you are stuck with the policy limit in effect when the incident occurred. Under a claims-made form policy, the policy limit in effect when the claim is first reported will apply. Therefore, as long as you keep up your policy limit with the inflation, you will be better protected. Q. Other than the high inflation scenario above, is the occurrence form generally better than the claims made form? A. The occurrence form is more straightforward because you don't have to worry about the tail coverage, assuming the insurance company remains financially strong years from now. Continued financial strength should not be taken for granted. Any medical malpractice insurance company has limited financial resources. They can become insolvent regardless how conservative they are managed. What can exacerbate this issue is they have to set the price of future coverage, too. The problem is it's extremely difficult to predict what's going to happen in the future as we all know. The claims made form gives the insurance company more time to react to any unforeseen events such as an elevated inflationary period. The occurrence form can cause the insurance company to be caught with the insufficient reserves and inadequate prices at the same time. This is why most of the insurance companies have switched over to the claims made form. The insurance companies have fiduciary responsibilities. They should sell products whose price can be reasonably determined. With the occurrence form, they have larger margin for error. We have been in a stable economic environment last 15 years or so. As long as it continues, the occurrence form is a better choice. However, if things start changing a la 1970s, all bets are off, and your occurrence form policy may become just a worthless piece of paper if the insurance company that issued it is no longer around. This is why the claims made form is prudent for the buyer and the seller. If you think you are doing better by buying the occurrence form coverage, you may be in for a surprise. You get what you pay for. If your insurance company cannot adjust their prices in time in a rapidly changing economic environment, they may not be able to honor your claims. Q. I now appreciate risks associated with the occurrence form, but I still like it because I don't have to worry about the tail premium. Is there a way to mitigate the tail premium? A. Unfortunately, No. We will explore various options such as buying back your ownership stake in MDIC to offset the tail premium. Also, keep in mind that, in case of death or disability at any age or permanent retirement after age 55, you will get a free tail. Q. I'm a New York doctor. How is a risk retention group different from the existing carriers such as MLMIC or PRI? A. New York is unique place in terms of medical malpractice insurance environment. Let's name a few things that make New York unique. First, New York is one of the few holdouts that haven't really switched over to the claims made form. The occurrence form is still the norm there. Second, admitted carriers - think MLMIC and PRI - are protected from insolvency by the legislature. In return, they have to share the burden of insuring the uninsurable doctors. These "uninsurable" doctors buy coverage from the MMIP at a multiple of what you pay. The MMIP is a financial burden on the system. They are in a perennial deficit. Also, if you buy the $1.3 million of primary coverage from an admitted carrier, you get a free excess coverage of $1 million in excess of the primary. However, if you buy the primary coverage from a non-admitted carrier, you don't get this free excess coverage. This is unique to New York, and keeps non-admitted carriers out of the state, for the most part. Q. Will the Silver/Gold/Platinum tiers be applicable to any foreign language? A. No. They are applicable to the Hard and Superhard foreign languages only, per the classification by the Department of State. Some foreign languages such as Spanish, Italian and French will not be eligible because they are deemed closely related to English. Q. I am a bilingual doctor. I am fluent in English and one of the Hard/Superhard foreign languages. Do I qualify for the Silver/Gold/Platinum tiers? A. Not necessarily. The tiered rating eligibility is based on the language you speak to your patients, not on whether you are bilingual or not. If you speak English to most of your patients, then you will not be eligible. On the other hand, even if you are a native English speaker, but you happen to focus your practice on a community that speaks one of the targeted languages and you and your patients speak that language as the primary means to communicate, you will be eligible. Q. What are the Hard languages? What are the Superhard languages? Who classifies them? A. We will follow the Department of State classifications. They classify the following languages Hard: Languages with significant linguistic and cultural differences from English. They are Albanian, Amharic, Armenian, Azerbaijani, Bengali, Bosnian, Bulgarian, Burmese, Belarusian, Croatian, Czech, Estonian, Finnish, Georgian, Greek, Hebrew, Hindi, Hungarian, Icelandic, Khmer, Kurdish, Kyrgyz, Lao, Latvian, Lithuanian, Macedonian, Malayalam, Mongolian, Nepali, Pashto, Persian, Polish, Russian, Serbian, Sinhala, Slovak, Slovenian, Tagalog, Tamil, Thai, Turkish, Turkmen, Ukrainian, Urdu, Uzbek, Vietnamese, Xhosa, Zulu. They classify the following languages Superhard: Arabic, Chinese, Japanese and Korean. Q. What sets AABCD and MDIC apart from existing carriers? A. MDIC's success will prove existing carriers' ineptitude in identifying a key rating variable. MDIC will incorporate patients' propensity to sue their doctors into the rating process. This is a novel concept. Existing carriers use only information about the doctor and his or her practice. To be fair to the existing carriers, we should point out that they use claims history as a key rating factor. Claims history captures any rating variable that's not explicitly used in the rating. For example, if two doctors practice in the specialty with similar practice profile and characteristics at the same general location will start off with the same premium, but may see large difference years later if one is never sued, but the other gets sued multiple times. The problem with using the claims history is three-fold. First, it takes many years - often 15+ years -before you get a meaningful claims history on an individual doctor. Second, the difference between no claim and one or two claims in a 15 year period can be purely luck. Third, a loss-free credit is often arbitrarily determined and varies from one insurer to another. MDIC will introduce a new rating variable based on credible statistics derived from a study of large number of claims. We will encourage existing carriers to do the same. After all, they are the ones who have the data. If the existing carriers adopt MDIC's new rating variables, there's no need for MDIC. Our mission will have been accomplished! The AABCD members will get the discount they deserve. Q. In what states will MDIC write medical malpractice insurance policies? A. Since the largest foreign-born population groups can be found in New York, New Jersey and California, those will be the primary states. MDIC will focus on New York and New Jersey initially, and then expand into California Beyond that, we expect limited opportunities in such states as Illinois, Texas, Pennsylvania, Georgia, Maryland and Virginia.