24 Feb Free Excess for NY Physicians May No Longer Be Free
The future of free excess limits for New York physicians is in jeopardy according to Governor Cuomo’s new 2021-2022 budget proposal. Since its inception in 1986, the Medical Malpractice Reform Act (commonly known as NYS Section 18) provides a free excess layer of $1M/$3M for physicians that have met the risk management requirements and have a $1.3M/$3.9M limit with a New York State admitted carrier.
New York is the largest medical malpractice market in the country, with a unique legal framework and no cap on payouts, making it a particularly risky place for practicing physicians. This program was originally created to make it more feasible to practice medicine in NY by providing additional financial support for physicians and hospitals.
What Could Change?
Cuomo’s new $193 billion budget however, calls for a restructuring of this program. Under this proposal, physicians seeking excess coverage would now be required to contribute 50% of the premium. The State would be responsible for the other half, or approximately $52 million annually (as listed in the budget).
According to the Governor’s Fiscal Year 2022 Executive Budget Briefing Book, the reason for this proposal change cites a strengthened medical malpractice environment and a 24% decrease in enrollment since 2015.
The argument about the decrease in enrollment is actually true. Since State-admitted carriers have rates regulated by the State, many physicians have instead begun using risk retention groups (RRGs) like MedPro RRG and Coverys RRG for more rate flexibility. While there are more carriers competing for physicians than any time in recent history, rates continue to be the most expensive in the country, and are on the rise.
Ultimately, the reality is New York continues to have the highest annual claim payout in the nation, and there is little evidence the full-funded program is no longer needed. In truth, NYS is facing a $15 billion budget deficit over the next two years and looking to identify any areas they can cut costs, which includes this program.
Should I Be Concerned?
If a physician is insured by a State-admitted carrier like MLMIC, PRI/EmPRO, HIC, or TDC then yes, this potential change would affect physicians seeking higher limits. The program has also seen previous changes in the past diminishing its growth, most recently in 2013 when the number of excess slots available to hospitals were essentially capped.
If a physician is insured by an RRG, however, this does not apply since only admitted carriers are eligible for the Section 18 free excess limits. Physicians using RRGs must pay for any additional excess.
What Can I Do?
Healthcare providers should use all means available to reach out to their State Legislators (through letters or tweeting from here) to tell them this change is unacceptable.
Phalanx Healthcare Solutions is a New York based medical malpractice insurance consultant specializing in insurance and reinsurance solutions for physicians, physician organizations, and healthcare systems. For more information, visit our web site at www.phalanxllc.com