AM Best Downgrades Credit Ratings of Members of Kansas Medical Mutual Group
October 17, 2019
AM Best has downgraded the Financial Strength Rating (FSR) to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings (Long-Term ICRs) to “bbb+” from “a-” of Kansas Medical Mutual Insurance Company, and its subsidiary, KAMMCO Casualty Company, Inc. These companies are referred to collectively as Kansas Medical Mutual Group (the group). The outlook of the FSR has been revised to stable from negative, while the outlook of the Long-Term ICRs remains negative. Both companies are domiciled in Topeka, KS.
The ratings reflect the group’s balance sheet strength, which AM Best categorizes as very strong, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management (ERM).
The rating downgrades reflect the change in the company’s operating performance assessment to marginal from adequate. Although the group produced strong earnings historically, results in recent years have been far less favorable, driven largely by underwriting losses and below average investment returns. As a result, the group’s profitability metrics are significantly below the medical professional liability (MPL) composite averages in each of the past five years. The disparity between recent and historical earnings further amplifies the group’s concentration risk in MPL lines, primarily in Kansas. Recent changes in Kansas law, which redefined who is a covered medical professional under the group’s policies, contributed to an increase in claims in 2017, although down slightly in 2018. A recent judicial ruling that resulted in the removal of non-economic damage caps in Kansas also is causing headwinds for the group, and subsequently, reserves are being recalculated, as increased litigation is expected. Compounding this has been the decline in written premium over the past five years and decrease in net investment income from the low interest rate environment.
The negative outlook of the Long-Term ICRs reflects the pressure being placed on the group’s overall ERM from continued adverse underwriting results and lack of demonstrated effective actions to control and mitigate the operating performance declines in recent years, as well as the significant challenges and uncertainties management is facing associated with the MPL industry in Kansas and the recent judicial ruling that could impact the group negatively. The revised FSR outlook to stable reflects the group’s very strong balance sheet.
Constellation Announces Strategic Collaboration With Baldrige Organization
October 10, 2019
Constellation announced a strategic collaboration with the Baldrige Performance Excellence Program, the Baldrige Foundation and the Alliance for Performance Excellence, which have a common mission of defining, recognizing and fostering excellence in healthcare, education, business, government and nonprofits. Since 1988, the Baldrige Award, which carries the presidential seal, has been the highest recognition in the nation for excellence across the critical performance areas of the Baldrige criteria found in the Baldrige Excellence Framework.
“As a medical profession liability (MPL) insurance company, we have achieved an industry milestone in our collaboration with Baldrige. It’s a way for Constellation to incorporate Baldrige standards of quality and excellence in what we do,” said Vince Gallucci, Constellation head of national programs and client relations. “Specifically, it embraces our own Constellation Aligned Performance Initiative (CAPI), which is a way we partner with our healthcare and senior living clients to acknowledge and advance their performance metrics. CAPI’s proprietary scoring system enables us to identify our clients’ performance results, as indicated by their scorecard or dashboard and — more importantly — to reward those results using premium adjustments, gain-sharing arrangements, multi-year rate locks and expert support for risk management programs.
“A Baldrige award recipient has demonstrated sustained high performance against the Baldrige criteria, which makes them a client we seek. And we are equally interested in the many healthcare organizations who have embraced performance excellence and are committed to delivering the highest-quality care in the communities they serve. Healthcare has placed a significant emphasis on measuring results and those results, we believe, are critical in determining risk.”
The collaboration breaks new ground for Baldrige as well.
“This is the first time we have been invited into the medical professional liability space in healthcare, and Constellation’s vision is extremely exciting for us as a partner as it allows us to advance our mission of expanding performance excellence across the U.S.,” said Brian Lassiter, chair of the Alliance for Performance Excellence (the consortium of 29 state, regional and sector Baldrige-based programs).
“We admire Vince and the Constellation team for seeing the potential in joining forces to increase the impact of our efforts to achieve better healthcare for all Americans, and for proposing novel ways of extending our reach. They are true pioneers in the medical professional liability market,” said Al Faber, President and CEO of the Baldrige Foundation.
Under the arrangement, Constellation member insurance companies MMIC, UMIA and Arkansas Mutual will reach out to Baldrige healthcare organizations to share the CAPI strategy with them for their business consideration and review. Ultimately, the goal of the collaboration is to help healthcare organizations reduce risk and improve clinical and nonclinical outcomes.
AM Best Removes From Under Review with Negative Implications and Downgrades Credit Ratings of CMIC Group’s Members
October 10, 2019
AM Best has removed from under review with negative implications and downgraded the Financial Strength Rating to B++ (Good) from A- (Excellent) and the Long-Term Issuer Credit Ratings to “bbb+” from “a-” of Connecticut Medical Insurance Company (Glastonbury, CT) and its sponsored risk retention group company, CMIC Risk Retention Group (District of Columbia). These companies are referred to collectively as CMIC Group (the group). The outlook assigned to these Credit Ratings (ratings) is stable.
The ratings reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its marginal operating performance, limited business profile and appropriate enterprise risk management.
The ratings were placed under review earlier this year in consideration of various strategic initiatives to be implemented by management aimed at improving operating performance. After conducting internal analysis, management decided not to pursue some of the proposed initiatives, largely as a result of costs versus the long-term benefit of such actions.
The ratings downgrade reflects a revision in AM Best’s view of the group’s operating performance from adequate to marginal. Underwriting losses (after policyholder dividends) have been generated since 2014, primarily due to increased claims severity, diminishing reserve redundancies and a declining premium base.
While the 10-year average underwriting and overall performance ratios compare favorably with the medical professional liability (MPL) composite, the more recent five-year ratios compare unfavorably to the MPL composite. Management has significantly reduced policy limits, implemented rate increases and revised underwriting guidelines in an attempt to improve results, which will take time to become evident due to the long-tailed nature of MPL insurance. In addition, management continues to analyze further options to improve operating performance.
ISMIE Mutual Launches Affinity Program for Association of Independent Doctors with New Discount
October 7, 2019
ISMIE Mutual Insurance Co. announced a new affinity program partnership with the Association of Independent Doctors (AID). This national program is open to all AID members in good standing. When they choose ISMIE for their medical liability coverage, AID members receive a 10-percent premium discount and gain access to ISMIE's risk management services and other benefits.
Based upon individual underwriting, AID members will also be eligible for additional premium discounts. To establish this program, AID collaborated with ISMIE-Endorsed broker, HUB International.
“This new partnership aligns perfectly with ISMIE’s expansion plan given ISMIE's history as a physician-founded insurer,” said ISMIE chairman Paul H. DeHaan, MD. “ISMIE understands what drives AID members and looks forward to standing with them as an ally as they care for patients.”
“We had been looking to partner with a national medical liability insurance company that shared our values and mission,” said Marni Jameson Carey, AID's executive director. “ISMIE is a perfect fit for AID as it is a highly respected, reliable carrier that can write medical professional liability insurance in all 50 states, and is committed to protecting doctors. By helping independent doctors' bottom lines, we help them survive in a challenging market.”
Global brokerage firm HUB International is also part of the new alliance. Its nationwide team of agents will work to process applications for AID members seeking the discount benefit. The program, which had a soft launch in August, is, as of this week, available to all AID members nationwide.
“We truly support the philosophy and mission of AID as an association,” said Daniel Nissi, HUB’s chief marketing officer, HUB Healthcare. “We have a great rapport with ISMIE and feel they offer the experience, knowledge and bandwidth to make this medical professional liability program successful.”
AID members can access the ISMIE affinity program through all ISMIE-appointed brokers, including program administrator HUB International. AID members can find information and request a quote at www.ismie.com/AID.
Acadia Professional Acquires Toro Risk Consulting Group
October 4, 2019
Acadia Professional, a medical professional liability insurance agency, announced the acquisition of Toro Risk Consulting Group, a healthcare consulting firm that primarily works with emerging companies to support providers in value-based care programs.
“Traditional medical malpractice risk can no longer be viewed in a silo. Toro brings a deeper understanding of value-based care and new market access that allows us to better position our clients from a risk perspective,” said Scott Parker, Acadia president.
“Toro is both a business and a cultural fit for Acadia,” said Henry Kane, Acadia co-founder. “The synergies position Acadia to deliver more expertise and resources to our clients who want to be ahead of value-based reimbursement programs.”
“We have long understood the need to align the risk providers take in value-based care programs with professional liability risk. With the acquisition of Toro, Acadia is now able to expand its portfolio to help clients leverage the transition to a value-based care system," said Brian Kern, who was the founder and managing member of Toro Risk, now a partner at Acadia.
Effective immediately, Toro Risk Consulting Group will move its office to Acadia's Headquarters in Morristown, N.J.
Medical Liability Monitor’s 2019 Annual Rate Survey Indicates a Medical Professional Liability (Medical Malpractice) Insurance Market Firming, But Are We Headed for a Real Hard Market?
October 2, 2019
According to just-released data from the 2019 Medical Liability Monitor Annual Rate Survey, for the first time since 2006, more than 25 percent of medical professional liability (MPL) premium rates increased, while for a second consecutive year, only 5 percent of rates decreased. These firming rates indicate a turn from the market’s decade-plus period of soft pricing, but is it headed for a real hard market — with annual rate increases averaging between 10 and 30 percent — similar to the last one, which started as a low simmer in 1998, heated up in 1999 and boiled from 2000 to 2006?
To answer this question, Annual Rate Survey guest editors Bill Burns and Alyssa Gittleman from the Insurance Research Department of the global investment management firm Conning compare current market conditions to those which preceded the last hard market. They note similarities between the two in the MPL industry’s operating ratio, return on equity, declining loss reserve margins, use of schedule credits and declining competition, but also observe significant differences in policyholder surplus, exposures and ceded reinsurance.
What do the Rates Say?
From 2007 to 2018, the results of the Annual Rate Survey had a certain familiarity — companies held most rates flat, decreased some rates and increased even fewer rates. In 2019, things look different — with more than 25 percent of the rates reported in the Survey increasing, while only 5 percent of rates decreased.
Based on the information gathered in this year’s Survey, the overall rate increase from 2018 to 2019 was approximately 0.8 percent. Drilling down, we see that rates in states without patient compensation funds (PCFs) increased by 1.1 percent, while rates in states with PCFs decreased by 1.1 percent (excluding one company’s exceptional rate decreases in two PCF states, that number would be an increase of 1.9 percent).
Several MPL insurers adopted rate increases for general surgery that were higher than those of the other specialties. A review of several rate filings suggests that the rate relativity for general surgery is increasing. It appears average costs for general surgery are increasing by more than average costs for the companies’ base class (hence the rising relativity). Consequently, rate increases for general surgery are greater than the average increases.
Excluding one company’s exceptional rate decreases in two PCF states, the average rate increase in the Midwest was 2 percent, 1.4 percent in the Northeast, 1.1 percent in the South and 0.3 percent in the West.
What Else Did We Learn from the Annual Rate Survey?
In addition to information on rates, respondents to the Survey provided color on other facets of the market, including underwriting, coverage, whether they are expanding or contracting the states in which they write business and their general view of the MPL market.
One conspicuous theme that jumped off the page came from responses to the question, “What do you view as the biggest threat to your market share?” The answers to this question indicate companies are concerned about a continued shrinkage of the exposure base of insurable physicians, brought about by hospitals acquiring physician practices and/or employing physicians as well as venture capital creating large physician groups that move to self-insurance.
To purchase the 2019 Annual Rate Survey, click here or call 312-944-7900.
A.M. Best Revises Outlooks to Negative for ProAssurance Corporation and Certain Subsidiaries
September 26, 2019
AM Best has revised the outlooks to negative from stable and affirmed the Financial Strength Rating (FSR) of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa-” of certain members of the ProAssurance Group. Concurrently, AM Best has upgraded the FSR to A+ (Superior) from A (Excellent) and the Long-Term ICR to “aa-” from “a+” of Eastern Alliance Insurance Company (Lancaster, PA) and its affiliates that are now a part of ProAssurance Group. The outlook of these Credit Ratings (ratings) have been revised to negative from stable. Additionally, AM Best has affirmed the FSR of A- (Excellent) and the Long-Term ICR of “a-” of PACO Assurance Company, Inc. (PACO) (Springfield, IL). The outlook of these ratings remain stable. (See below for a detailed listing of the companies ratings.)
All companies are indirect subsidiaries of ProAssurance Corporation (PRA).
Along with these rating actions, AM Best has revised the outlooks to negative from stable and affirmed the Long-Term ICR of “a-” of PRA and the Long-Term Issue Credit Rating (Long-Term IR) of “a-” on PRA’s $250.0 million 5.30% 10-year senior unsecured notes, due 2023. AM Best also has affirmed the indicative Long-Term IRs under the shelf registration of “a-” on the senior unsecured debt, “bbb+” on the senior subordinated debt and “bbb” on the preferred stock of PRA.
The ratings of ProAssurance Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, favorable business profile and appropriate enterprise risk management (ERM).
The negative outlooks reflect the negative trend in the ProAssurance Group’s operating performance in recent years, which has resulted in underwriting and operating metrics falling to a level that, although still solid, is more in-line with its peers in the medical professional liability (MPL) industry, instead of out-performing them. While the group continues to report favorable prior period reserve development, the magnitude of favorable development has declined in recent years and AM Best expects this trend to continue, especially given concerns with regard to rising loss costs in the MPL industry.
The group’s balance sheet strength assessment continues to reflect its strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), as well as the strength of its reserves and the quality of its investments. The ratings also consider the ProAssurance Group’s market position as one of the leading MPL insurers in the United States, as well as its diversification across multiple disciplines, geographic areas and in its other lines of business. These ratings also acknowledge the depth and breadth of the group’s ERM programs and policies. In addressing challenges in a prolonged soft MPL market, management has leveraged its talent, knowledge base and market position to introduce innovative alternatives.
The upgrade of the Eastern Alliance Insurance Company and its affiliates reflect their status as members of the ProAssurance Group due to their strategic importance as successful specialty workers compensation writers, common management and significant earnings contributions.
The ratings of PACO reflects its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also reflect lift from the lead rating unit, ProAssurance Group, based on implicit support.
PACO’s ratings reflect its strongest risk-adjusted capital position and generally improved operating performance since being acquired by PRA in 2009. The company’s underwriting has been modestly profitable, benefiting from favorable industry trends in claims and losses in a lower-risk line of business during a softening market. PACO broadens PRA’s MPL lines of business to include chiropractors and acupuncturists, another niche medical specialty with favorable loss parameters.
Each of the rating units discussed above also benefits from the financial flexibility provided by PRA, the ultimate parent. PRA’s financial leverage is conservative, its interest coverage is solid and it holds cash and short-term investments outside of the insurance operating companies that are available for use without regulatory approval. At the same time, surplus growth at most rating units has been limited over the past five years by the payment of significant dividends to PRA, which they have utilized to pay shareholders’ dividends and repurchase company stock. Nonetheless, management remains committed to maintaining capital at the rated entities at levels commensurate with their ratings.
The outlooks have been revised to negative from stable and the FSR of A+ (Superior) and the Long-Term ICR of “aa-” have been affirmed for the following members of the ProAssurance Group:
• ProAssurance Casualty Company
• ProAssurance Indemnity Company, Inc.
• ProAssurance Specialty Insurance Company, Inc.
• Medmarc Casualty Insurance Company
• Noetic Specialty Insurance Company
• Podiatry Insurance Company of America
• ProAssurance American Mutual, A Risk Retention Group
The FSR has been upgraded to A+ (Superior) from A (Excellent) and the Long-Term ICRs to “aa-” from “a+” with the outlooks revised to negative from stable for Eastern Alliance Insurance Company and its affiliates:
• Allied Eastern Indemnity Company
• Eastern Advantage Assurance Company
AMA Inaugurates Recognition Program in Fight Against Physician Burnout
September 24, 2019
The American Medical Association (AMA) recognized 22 healthcare organizations as the first recipients of the inaugural Joy in Medicine Recognition. The new distinction offered by the AMA recognizes healthcare organizations that have committed to efforts that improve physician satisfaction and reduce burnout.
“It is a great honor to recognize the outstanding achievements of the organizations selected for the Joy in Medicine Recognition,” said AMA Board Chair Jesse M. Ehrenfeld, MD, MPH. “These organizations are true leaders in promoting physician well-being and continue to make a difference in the lives of our nation’s health are workforce.”
Candidates and their achievements to reduce physician burnout were evaluated against criteria demonstrating competencies in commitment, assessment, leadership, efficiency of practice environment, teamwork and support.
The recipients of the inaugural Joy in Medicine Recognition are:
Ascension Medical Group, St. Louis, Mo.
Beth Israel Deaconess Medical Center, Boston, Mass.
Boston Medical Center, Boston, Mass.
Cleveland Clinic, Cleveland, Ohio
Geisinger Health System, Danville, Pa.
Gould Medical Group, Modesto, Calif.
Heartland Health Centers, Chicago, Ill.
Icahn School of Medicine Mount Sinai, New York, N.Y.
Mayo Clinic, Rochester, Minn.
National Capital Region Military Health System, Bethesda, Md.
Northwestern Medicine, Chicago, Ill.
Oak Street Health, Chicago, Ill.
Ochsner Health System, New Orleans, La.
Southern California Permanente Group, Calif.
St. Vincent Medical Group, Ind.
Stanford Health Care, Palo Alto, Calif.
University of Colorado School of Medicine, Aurora. Colo.
UNC Health Care, Chapel Hill, N.C.
UPMC, Pittsburgh, Pa.
University of Rochester Medical Center, Rochester, N.Y.
Virginia Mason Medical Center, Seattle, Wash.
Wake Forest School of Medicine, Winston-Salem, N.C.
The Joy in Medicine Recognition Program is a component of the AMA’s Practice Transformation Initiative, an ambitious new course of action to advance evidence-based solutions that fill the knowledge gap in effective solutions to the physician burnout crisis.
“The Joy in Medicine Recognition Program is designed by the AMA to serve as a guide and catalyst for organizations who are interested, engaged and committed in efforts to fight the root causes of physician burnout,” said Ehrenfeld said. “The AMA is optimistic that the program will serve as a roadmap to reduce burnout within organizations and unite the health care community around systematic changes that will energize physicians in their life’s work of caring for patients.”
The founding of the Joy in Medicine Recognition Program was influenced by three timely and prominent sources — a call-to-action blog post in Health Affairs titled Physician Burnout is a Public Health Crisis: A Message to our Fellow CEOs, a research article published in JAMA Internal Medicine titled The Business Case for Investing in Physician Well-being and the multi-stakeholder effort resulting in the Charter on Physician Well-being.
The AMA continues to work on every front to address the physician burnout crisis. Through its research, collaborations, advocacy and leadership, the AMA is working to make the patient‐physician relationship more valued than paperwork, preventive care the focus of the future, technology an asset and not a burden, and physician burnout a thing of the past.
Michael G. Roque Joins CMIC Group as Chief Operating Officer
September 11, 2019
CMIC Group announced that Michael G. Roque has joined the CMIC Group team as the new Chief Operating Officer.
Roque has more than 20 years of experience in medical professional liability, working on both the broker and carrier sides. Most recently, he served as vice president of Business Development at NORCAL Mutual Insurance Co. Roque holds a BBA in Risk Management & Insurance from Temple University.
“We are very pleased to have Michael join our Team,” said Stephen J. Gallant, chief executive officer of CMIC Group. “His knowledge and experience within the MPL industry will be a tremendous asset for the company. We look forward to his leadership and insight as we continue to grow the company.”
ProAssurance Declares Quarterly Dividend
September 5, 2019
The Board of Directors of ProAssurance Corp. has declared a cash dividend of $0.31 per common share, payable on Oct. 11, 2019, to shareholders who own our stock as of Sept. 27, 2019.
The company's dividend policy anticipates a total annual dividend of $1.24 per share, to be paid in equal quarterly installments. However, any decision to pay future cash dividends will be subject to the Board’s final determination after a comprehensive review of the ProAssurance's financial performance, future expectations and other factors deemed relevant by the Board.