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Rates reduced for physician-policyholders in
Maine and New Hampshire
Maine hospitals get mixed rate news
“Because the physician component
is most likely the single largest
premium item in a hospital’s
comprehensive medical professional
liability insurance program,
any increase in a hospital’s rates
should be more than offset by
the reduction in the institution’s
physician premium.”
— Terrance J. Sheehan, MD
President & CEO
Medical Mutual physician-policyholders
in New Hampshire and Maine received
welcome news about their renewal rates
this summer. On July 25, 2008 Medical
Mutual President and CEO, Terrance J.
Sheehan, MD, informed New Hampshire
physician-policyholders that revised relativity
factors would yield a “net” rate
reduction of 8.6 percent effective on
October 1, 2008. In a similar letter to
Maine physician-policyholders on August
15, Sheehan announced that the
Company reduced physician base rates
and modified relativity factors, the combination
of which would produce an overall
average “net” rate reduction of 10.8 percent
effective on October 1, 2008 as well.
A relativity factor is used to develop the experience (expected losses and expenses) of each physician specialty relative to the base risk class, which is Family Practice. For example, the relativity factor of 5.250 for an Ob/Gyn indicates that this specialty’s expected losses exceed the expected losses of a family practitioner by 5.250 times.
Accordingly, the announced rate
changes varied by specialty in both states.
And while relativity factors increased for
a few specialties, the changes resulted in
reductions for nearly all physicians. And
as Sheehan noted in his Maine policyholder
letter, “the base rate reduction
coupled with this year’s spring dividend
declaration will mitigate, if not completely
offset, any individual specialty’s increase
due to relativity changes.”
Different loss experiences state-to-state
yield different rates
The different reductions reflect the different
loss experiences in the Maine and
New Hampshire markets for the time
period analyzed by Medical Mutual’s
independent actuarial firm, Milliman
USA, to determine rates. Both, however,
are the products of an improved claimsfrequency
trend that has taken root in
Northern New England and nationally
over the past several years.
Commenting on the overall trend and
resulting rate actions, Sheehan said, “We
are hopeful that the trend in moderated
claims frequency can not only sustain
itself, but that it will also generate better
news ahead for all specialties.”
Mixed, but overall positive, rate
news for Maine hospitals
While the actuarial analysis indicated a
five percent increase in base rates for
Maine hospitals, Sheehan said that even
for these hospitals, the impact of all the
rate actions, on balance, was positive.
“Because the physician component is
most likely the single largest premium
item in a hospital’s comprehensive medical
professional liability insurance program,
any increase in a hospital’s rates should
be more than offset by the reduction in
the institution’s physician premium,”
said Sheehan.
At press time, Milliman USA was in the midst of conducting its actuarial review of the Vermont market. The analysis, said Sheehan, was expected to be completed by the end of September, with any resulting rate action to be announced shortly thereafter.