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.