The state’s largest medical malpractice insurer is making a play for the rural hospital market and plans to become more competitive by lowering the rates for its higher-limit facilities coverage.
Louisiana Medical Mutual Insurance Co., known as LAMMICO, has asked the state Department of Insurance to approve a reduction of 19 percent overall for its facilities coverage, according to the rate filing. The proposed rate will affect 15 policyholders and reduce rates a total of $125,560.
The idea is to bring the policies with limits higher than $100,000 for professional liability and $300,000 for general liability into line with competitors, said Lisa Smith, LAMMICO’s director of underwriting.
“That’s where we seem to be a little off from a competitive standpoint,” Smith said.
Fred Kirchgraber, vice president, business development, said LAMMICO has always looked at alternative income sources and growth. Writing policies for acute care hospitals is not “a huge leap,” he said.
The company has been providing medical professional liability coverage for more than 30 years, Kirchgraber said. Physicians’ liability probably represents the majority of risk for hospitals.
“We’ve been handling these claims for a long time. It’s a natural source of income for us,” Kirchgraber said.
Louisiana’s medical malpractice claims are capped at $500,000. Facilities and healthcare professionals buy private insurance or self-insure for the first $100,000. Health-care providers then get the remaining coverage from the Louisiana Patient’s Compensation Fund.
LAMMICO is attempting to reduce its rates for policies above the $100,000 professional liability limit and $300,000 for general liability, according to its rate filing.
General liability is not covered by the Patient’s Compensation Fund.
It would appear that LAMMICO hopes to compete in that area, said John Matessino, chief executive officer of the Louisiana Hospital Association. The industry group oversees the trusts where most rural hospitals purchase professional liability and general liability.
There are about 50 small rural hospitals in the state, he said.
Matessino said he wasn’t familiar with the specifics of LAMMICO’s rate filing and could not comment on them.
Lorraine LeBlanc, executive director of the Patient’s Compensation Fund, said the majority of rural hospitals now buy their first layer of coverage through Louisiana Hospital Association’s trust funds.
The other rural hospitals buy coverage through private insurers, including “surplus lines” companies, she said.
Surplus lines companies offer insurance that typically isn’t available in state or when the highest rates allowed by state regulators are considered too low by the in-state companies that do offer the policies.
Surplus lines companies are not regulated by the state Department of Insurance.
The trust funds act like an insurance company, collecting premiums from members to cover the first $100,000 in malpractice coverage, LeBlanc said. The trusts must also post $125,000 in security, generally through a bond, a certificate of deposit or letter of credit, with the Patient’s Compensation Fund.
The trusts’ members get the second layer of coverage through the Patient’s Compensation Fund, she said.
LeBlanc said she attended an insurance agents meeting in May, where LAMMICO officials discussed the plan to compete for the rural hospitals’ business.
They want the smaller hospitals, as well as rehabilitation and psychiatric facilities, LeBlanc said.