The majority of Health Care Stabilization Fund surcharge rates remain unchanged and some percentage surcharge rates are reduced

Health Care Stabilization Fund surcharge rates for the majority of health care providers will not change for Fiscal Year 2005 which begins on July 1, 2004.  Health care providers who pay a surcharge that is based on a percentage surcharge rate (such as hospitals and health care providers insured by the Availability Plan)  and are selecting the Fund coverage limits of $800,000/$2,400,000 or $300,000/$600,000 will benefit from a 9% reduction in their percentage surcharge rate factor.  That is, the current percentage surcharge rate for the $800,000/$2,400,000 limit is 35% and for the $300,000/$900,000 limit is 30%.  Effective July 1, 2004 those rates become 32% and 26%, respectively.  The percentage surcharge rate for the lowest Fund coverage limit of $100,000/$300,000 was not changed and will be continued at 20%.  The percentage surcharge rate is applied to the health care provider’s basic $200,000/$600,000 premium cost to determine their Fund surcharge payment amount.

The new percentage surcharge rates are intended to lower the overall surcharge revenue cost for those health care providers who pay the percentage based surcharge rates.   This is possible because during recent years the cost of basic professional liability insurance coverage has been increasing.  Those increases also resulted in higher surcharge payments from health care providers who paid a percentage based surcharge amount for their Fund coverage.  This is the second consecutive year that reductions have been made to the percentage based surcharge rates.  The following table overviews these changes:

 “Once again we are fortunate that the present actuarial evaluations of the liabilities of the Fund do not require substantial changes in our annual surcharge rates,” commented Dr. Praeger, Chairperson of the Fund Board of Governors.  He continued by saying, “We seem to be benefiting from those years when the loss expectations of the Fund drove our Kansas surcharge rates to extremely high costs for our health care providers.  With the aid of many people we were able to enact reasonable changes to the Fund coverage limits which have resulted in greater predictability and what we believe to be greater accuracy in setting our annual surcharge rates.”  Dr. Praeger was also quick to point out that there is an increasing number of new cases being filed in Kansas naming an even greater number of health care providers.  This increasing number of cases and what we are reading about in states other than Kansas, means that each health care provider needs to be aware that our present Fund surcharge rate stability could change quickly and possibly very dramatically.

In the near future, the FY 2005 Annual Premium Surcharge and Rating Classification System brochure will be available.  Copies may be requested from the Fund office or downloaded from the Internet web site of the Fund (http://www.hcsf.org). 

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Kansas basic coverage market conditions

Our Kansas basic professional liability market has changed significantly during the past two years.  At the beginning of 2002, there were about forty insurance companies actively competing to insure Kansas health care providers.  Fifteen to twenty of those insurance companies provided coverage to approximately 80% of our health care providers.  Two years ago, individual health care providers and groups of health care providers could “shop the market” for the lowest premium cost, the most accessible insurance agent, an insurer which offered excess coverage above the Fund limits or other market services that may have been readily available.  While the remaining available basic coverage insurance markets continue to be accommodating and service orientated, there are fewer insurance companies participating and some options are difficult to locate or are no longer available.

The most recent information we have compiled from coverage and surcharge payment records indicates approximately 80% of our health care providers are insured by one of eight insurance companies.  Many physician and surgeon specialties such as emergency room doctors and OB/GYN doctors may be confronted with only one or two remaining insurance markets.  Kansas hospitals are also being confronted with a very limited number of insurance companies from which coverage may be obtained.  The number of health care providers who have been unable to obtain their professional liability insurance coverage from an insurance company and have been insured by the Health Care Provider Insurance Availability Plan has tripled in the last two years.  The following table reviews this information:

Included in the Fund Internet web site information is a similar listing of insurance companies which are providing basic professional liability insurance coverage for Kansas health care providers.  That list does include the kind of health care provider (doctor, hospital, RNA, etc.) insured and contact information for each of the listed insurers.  We attempt to maintain this list as accurately as possible and hope that it is of assistance to health care providers, their insurance agents and insurance company representatives. 

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Are you planning on discontinuing your status as an active Kansas health care provider?

The following is a basic checklist of recommended actions you should consider when discontinuing your status as an active Kansas health care provider.  These suggestions are based on what the Health Care Stabilization Fund believes to be reasonable for the average health care provider.  Hopefully, these suggestions will assist health care providers in avoiding potential basic coverage policy termination problems, basic professional liability premium refund problems, Fund tail coverage problems if you have complied with the Fund for less than five years, and a refund of unearned surcharge payment problems.

CHECKLIST OF ACTIONS YOU SHOULD TAKE WHEN DISCONTINUING YOUR BASIC PROFESSIONAL LIABILITY POLICY

¨ Contact your insurance company.  You will want to know what your company requires to terminate your basic professional liability insurance coverage (this includes allowing your policy to expire without renewing or extending the coverage period).

·     Ask about the issuance by the company of a termination, cancellation or non-renewal notice.  You, your licensing agency and the Fund should receive a copy of that notice.

·     Ask about any possible refund that may be available from a mid-policy period termination.

¨  Contact your licensing agency.  Ask about their requirements, comments or suggestions for active health care providers who wish to be inactive health care providers.

¨ Contact the Health Care Stabilization Fund.

·     Ask about tail coverage from the Fund.  If you have less than five years of Fund compliance, you will want to consider paying an additional optional tail coverage surcharge payment to obtain the continuing Fund tail coverage.

·     Ask about any refund that may be available from a mid-coverage period termination.

The Health Care Stabilization Fund law should make becoming an inactive Kansas health care provider less difficult than if you were located and practicing in a state other than Kansas.  For example, the Fund will afford continuing coverage (often referred to as “tail coverage”) for those health care providers with more than five years of Fund coverage who become inactive health care providers.

Even those health care providers with less than five years of Fund coverage should find the cost and decision regarding the optional acquisition of continuing tail coverage from the Fund less difficult than what tail coverage arrangements may be in other states.

IMPORTANT NOTE:  Your insurance company is required by law to provide written cancellation, termination and non-renewal notices within specified time periods.  Please contact your insurance company whenever you are planning to terminate, non-renew or otherwise terminate  your basic professional liability insurance policy. 

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Watch for gaps in coverage when changing basic coverage insurance companies

Tight market conditions continue to force some health care providers to change their basic coverage insurance company.  Even those health care providers who have already changed their basic coverage insurance company one or more times may be confronted with yet another change in the near future.  This possible change may be the result of increased basic coverage availability that will allow health care providers to leave the Health Care Provider Insurance Availability Plan and return their basic coverage to a voluntary insurance company.

The purpose of this article is to assist health care providers in avoiding unnecessary problems with their basic professional liability insurance coverage and policy provisions.  Listed below are some of the most common issues to review with your insurance agent or insurance company representative:

1.       Will the beginning or inception date of the new policy match the expiration or termination date of the existing policy, leaving no period of time uncovered when coverage was actually desired?

2.       Are there any known situations which may be reasonably anticipated as giving rise to some future claim or allegation of coverage under the basic coverage policy?  Make sure any questionable situation is reviewed carefully with your insurance agent or company representative.

3.       Are the claims made coverage “triggers” between the two insurance company policy forms compatible?  Minor language differences between insurance company policies can and do result in disputes between basic coverage insurance companies.

4.       Some insurance companies have different “territorial coverage” provisions.  If you previously practiced outside of Kansas while you were a Kansas resident health care provider, you should review this area carefully (also you may wish to review the August 2003 newsletter article regarding these differences between insurance company policy forms).

5.       Review coverage exclusions contained in policy forms.  The Kansas Health Care Provider Insurance Availability Act and other related laws allow exclusions for claims arising from sexual acts or activities of a health care provider, the removal of coverage for vicarious liability between defined health care providers and punitive damage liability.

These are some of the major items to specifically review.  You should ask your insurance agent or company representative to provide a review and summary of any other substantial differences between your existing basic coverage policy and the replacement basic coverage policy.

Health care providers who have recently changed their basic coverage insurance companies and did not ask for a review of these matters, may wish to contact their current insurance agent or insurance company representative asking for a similar review at this time.

If you find coverage gaps or coverage differences which are of concern, you should contact your insurance agent, insurance company representative or the Kansas Insurance Department. 

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