Malpractice premium discounts: They don't come easy now

Malpractice premium discounts: They don't come easy now

Some carriers still offer markdowns-as much as 35 percentin one case-but they demand more than just a few hours at a risk managementseminar.

Many malpractice insurers have long offered the carrot of premium discountsto physicians who improve their risk management behavior. Most common hasbeen a discount of at least 5 percent of the annual premium to doctors whoattend a risk management seminar every year or two. This has usually meanttrading half a Saturday for several thousand dollars in savings. Yet someinsurers report that fewer than half their clients take advantage of thedeal.

At New York-based Medical Liability Mutual Insurance, for example, the5 percent seminar discount can be bumped up to 12 percent if a doctor isa voluntary attending at a MLMIC-insured hospital. But nearly 40 percentof the company's 14,000 insureds don't even try for the seminar discount.

So, many insurers are taking a second look at incentives. Some have droppedthe seminar discount as ineffective; some have rejiggered their risk managementimprovement programs. But others have not: At least one company now offersup to 35 percent off its malpractice premiums for physicians who take advantageof all the company's programs.

It may be time to check what your insurer is offering, and how much youmight save--and learn--by taking part.

Are discounts just cost-shifting?

When it comes to risk management strategies, insurers now fall roughlyinto two camps.

Camp 1 consists of insurers who have dropped, or never adopted, the seminardiscount. "We found that physicians attended courses only for the discount,"says plastic surgeon Mark Gorney, medical director of The Doctors' Companyin Napa, CA. "They paid very little attention. They'd register, sneakout, and go play golf."

So even though The Doctors' Company, California's largest malpracticeinsurance carrier, continues to provide a wide range of seminars and otherrisk management educational projects, it doesn't give discounts for them.The company's strategy is to help clients fend off malpractice suits byincluding risk management education in seminars about new medical research,organized by specialty. "If you sandwich the risk management informationin between medical information that they can relate to," says Gorney,"then it means something." Doctors who complete the courses getcredit toward their CME requirements.

St. Paul Fire and Marine, the nation's largest malpractice underwriter,the Illinois State Medical Inter-Insurance Ex-change (ISMIE), Florida PhysiciansInsurance, and Seattle-based Physicians Insurance Exchange also have eschewedeasy markdowns. St. Paul, for instance, offers risk management discountsonly on an individual basis, based on an underwriter's assessment of eachdoctor's practice. ISMIE, like many insurers, reduces premiums for doctorswith a history of few or no malpractice claims. "We've taken the tackthat our pricing will reflect the losses that an insured creates,"says Alan J. Allphin, ISMIE vice president of underwriting.

Physicians Insurance Ex-change offers its physicians an extensive riskmanagement educational program, in part because Washington state law requiresit. Each doctor must get formal risk management education from his malpracticeinsurer at least every three years. The physician-owned carrier has discussedoffering discounts. "But it just isn't our culture," says GaryL. Morse, vice president and general counsel. "Besides, if you givea discount in one area, there's a higher price in another. You've stillgot to get a dollar for a dollar's worth of risk."

Until recently, Mutual Insurance Co. of Arizona took an unusual approachto premium discounts. It granted no individual price breaks to any of its3,800 covered doctors, but those who practiced in small groups (five tonine physicians) became eligible for discounts if the group satisfied certainof MICA's risk management criteria. If a group met three of the company's10 criteria, the doctors got a 5 percent discount; if it met all 10, thedoctors were eligible for 10 percent. Few groups performed well enough tomerit the maximum deduction, but about half of those served by MICA participatedin the discount system. The company is now changing the program.

Or do price breaks encourage risk management?

In the other camp are insurers who still use financial incentives toencourage risk management improvements. They argue that if these programscan be made to work--that is, if discounts lower their risk as insurers--thesavings in liability losses can be passed along to physician clients.

The PHICO Group, which provides malpractice insurance for about 25,000physicians in every state, offers discounts that range from 5 to 10 percent,depending upon applicable state laws. The discount is based on seminar at-tendance,the doctor's response to a written risk-assessment survey, and, where appropriate,participation in more intensive risk management programs.

The intensive programs are aimed at physician groups and hospital staffsto which the doctor may belong, and they lead to group discounts. "Forinstance, a group of 10 cardiologists may generate premiums that give usthe flexibility to credit each doctor more than we could if we were covering10 individuals, because of the way different states make us file rates,"explains Jim Voltz, senior vice president of field operations for PHICO.

Medical Assurance, based in Birmingham, AL, offers the traditional 5percent seminar discount to its 13,000 physicians practicing in 10 statesin the Southeast and Midwest. It also offers additional risk managementdiscounts to specialists such as obstetricians who treat their patientsin hospitals insured by the company.

That's because the company can monitor those sites--a practice doctorscan expect to see more of in the years ahead. CNA HealthPro, which insuresmore than 10,000 physicians in 40 states, still gives a 5 percent discountto physicians for three years if they attend a four-hour risk managementseminar. But Vice President Michael Ragan predicts that this custom willultimately be replaced by other CNA programs. "We're going to see insurersworking more closely with their doctors," says Ragan. "There'llbe more of a team approach." This will lead to other ways of assess-inga physician's risk management situation, he predicts, and to lower insurancecosts.

Another trend is toward innovative educational delivery systems. At SanFrancisco-based NORCAL Mutual Insurance, only one of seven risk managementcourses that qualify doctors for an annual 5 percent discount is deliveredlive--the four-hour seminar, "Physician Stress and Burnout: The HiddenMalpractice Crisis." The other six are available in a traditional correspondence-courseformat, on the Internet, or on a CD-ROM a doctor can pop into his computerand study on his own schedule. These include: "Medication Errors,""Failure to Diagnose Acute Myocardial Infarction," and "Failureto Diagnose Breast Cancer." (The clinical courses can also satisfyCME obligations.)

"The trend is away from the live seminar," says Stephen M.Farber, NORCAL vice president of risk management. "Alternative media,which accommodate different learning styles, are working best for us."He estimates that 30 percent of the company's insured physicians are nowactive in the risk management program. The company provides malpracticeinsurance for 11,500 physicians--most in California, but some in Rhode Island,Oregon, and Alaska.

Unlike most insurers, NORCAL will also give a discount to a doctor forcertain professional services outside of practice. A physician who spendsa year in any of several slots--on a hospital's quality-assurance committee,for example, or on a state or national medical specialty committee, or asa hospital's chief of staff or department chair--is eligible for a 5 percentrisk management discount for two years.

Like other price rollbacks, however, discount programs may fall victimto bottom-line considerations. Frontier HealthCare, for instance, a NewYork-based insurer that writes malpractice policies for 10,000 physiciansin Florida, Illinois, Michigan, New York, Ohio, and Texas, trimmed its two-year10 percent discount for attending a risk management seminar to 5 percent.Competition among carriers had encouraged Frontier and other insurers tooffer discounts and low premiums, says Gary P. Machnowski, the company'ssenior risk management coordinator. But with claims catching up with premiumsrecently, he explains, "the industry is getting ready to pay the piper."

Despite the recent cutback, however, Frontier still offers an additional5 percent discount to doctors who take one of its self-study follow-up courses.And, like several insurers, Frontier offers yet an additional 5 percentpremium credit to doctors who use or adopt an approved electronic medicalrecords system.

Not all insurers welcome electronic systems, however. A few see increased,not decreased, liability in a process that so clearly spotlights the doctorwho hasn't filled in all the electronic blank spaces. But most carrierssee the new systems as a plus, for exactly the same reason. "In halfor more of our claims," says Machnowski, "there's an issue ofdocumentation, be it indecipherable handwriting or incomplete notes. A goodEMR system can go a long way toward rectifying that."

While many insurers are considering discounts for doctors who use electronicsystems, some aren't yet comfortable with today's commercially availablesoftware. Scott R. Berglund, vice president of risk management at TexasMedical Liability Trust, is among those who've decided that EMR systemsare "premature."

"Plaintiffs' attorneys would really like to see some of these systemsout there," he explains, "because the doctor becomes immediatelyresponsible for all features of the program. If he or his staff aren't fullytrained on it, and don't work it to perfection, his liability actually increases."Berglund does believe that electronic medical records are the future, however,and will someday improve physicians' quality of care. "With the paperrecord, some important information goes down a black hole," he says."It's difficult to retrieve in a useable format."

Specialty-specific records systems

In the meantime, most insurers are focusing harder on limiting risk--andare trying both new and conventional methods.

Texas Medical Liability Trust has almost doubled the size of its riskmanagement department in the last two years, and currently offers the conventional5 percent discount for attendance at a live seminar plus a 3 percent discountfor physicians who do well in a practice review. Yet even now the companyalso likes--and gives a 3 percent discount for using--records systems basedon specialties.

One that Scott Berglund praises is "Prenatal Care--A Systems Approach,"a record-keeping system designed almost two decades ago by Tulsa-based AdvancedMedical Systems. The company's founders, pediatrician Arnold Greensher andemergency medicine specialist Howard Roemer, have compiled a detailed, color-codedlooseleaf manual that is updated with new research and pertinent legal changesfour times a year. The kit also includes a training video for the doctor,flowcharts that cover the pregnancy from start to term, as well as handoutsand questionnaires for patients.

"It's had absolutely stunning results" reducing both incidentsand claims, says Berg-lund. He calls the system particularly useful forFPs who do obstetrics.

The same prenatal care system is used by Denver-based Copic. Other malpracticecarriers consider Copic's elaborate programs and discounts, devised by physicians,"risk management with teeth," in the words of one executive.

In large part that's because the programs are evidence-based, says pediatricianJerome M. Buckley, Copic's chairman and CEO. "And the evidence is notjust derived from retrospective claims analysis, as most companies do it."Doctors are encouraged, with no penalty involved, to tell the insurer aboutincidents that may never end up as claims.

Copic's risk management guidelines for physicians range from using clearhandwriting at all times to being able to document their thinking throughouta case. In return for Copic's standard 10 percent risk management discount,a doctor must agree to let insurance representatives show up at his officeat any time and check that the guidelines are being followed.

Attendance at seminars (the carrier offers an array of them) is worthanother 10 percent in discounts. Years of continuous coverage and claims-freepractice earn yet another 15 percent markdown--meaning that fully involvedphysicians can get discounts of up to 35 percent. Many of these discountsare given when a doctor first signs up with Copic, whose 4,500 clients constitutemore than three-quarters of Colorado's doctors. The motivation, then, explainsBuckley, is to protect the discounts as time goes on. "Every insuredbegins with them. If he loses them, he's got nobody but himself to blame."

Physicians are happy to be treated with such dignity, to be given thebenefit of the doubt up front, Buckley says. He estimates that 95 percentof Copic's doctors are getting one discount or another. And the insurer'sconstant monitoring and other measures, as well as tort reform in the Coloradolegislature, have drastically cut malpractice premiums in the state. A Coloradoobstetrician who in 1988 paid $68,000 a year for malpractice insurance nowspends less than $26,000, says Buckley.

On the longer horizon, many insurers are trying to make their risk managementprograms more behavior-oriented and less driven by seminar discounts. Record-keepingsystems and practice advisories attempt to change the way doctors run theireveryday practice.

"We first thought that physicians might get angry when we tied riskmanagement discounts to implementation of change instead of just going toa seminar," says Scott Berglund of Texas Medical Liability Trust. "Butwe found that the doctors are relieved and very happy that someone's actuallyspending time with them, talking about real stuff, and how to do it."

By Michael Parrish

The author is a freelance writer in Los Angeles.



Michael Parrish. Malpractice premium discounts: They don't come easy now. Medical Economics 1999;16:63.