What is a RRG? Should NY Physicians & Surgeons consider RRG Medical Malpractice Coverage?

A Risk Retention Group (RRG) is a type of insurance company formed under a Federal law, not State law:  The Federal Liability Risk Retention Act of 1986 (LRRA).  A RRG that is authorized under LRRA allows the RRG to be chartered or domiciled in one State, but be able to engage in its insurance business in any State, with certain restrictions. The primary difference between a traditional insurance company and a RRG is that a RRG is owned by its policyholders:  the policyholders are also stock holders of the RRG. NY & NJ physicians looking for medical malpractice insurance options should consider the following advantages and disadvantages of RRG’s: Advantages of a RRG: 1.Premium savings:  Often times, RRG premiums are lower than those charged by traditional State licensed and admitted insurance carriers.  This is especially true in instances where the physician has an above –average claims history, or has a record of disciplinary actions. 2.Coverage across mutliple States:  For physician groups and healthcare facilities that have practices in multiple states, a RRG would be a good fit because of the ability of RRG’s to write in any State.  Most ‘traditional’ carriers operate in the State of their domicile, with the limited ability to cover exposure in a neighboring State. 3.Control:  A RRG may be able to afford more control to its policy holders, who are also the stock holders of the company in areas of risk and litigation management. 4.Flexibility:  RRG’s can have immense flexibiltiy in designing special coverge features to meet the specific needs of certain groups or health care facilities. Disadvantages of a RRG: 1.State Guaranty Fund:  Physicians insured by State licensed carriers such as MLMIC or PRI in NY are protected by the State guaranty fund in the event of insolvency of the insurance carrier.  However, physicians insured by a RRG are NOT protected by an State guaranty fund. 2.NY Excess Coverage:  NY physicians who are insured with primary limits of $1.3M/$3.9M by a State licensed and admitted carrier can be eligible for NY Excess coverage of $1M/$3M at no additional cost.  Physicians insured through a RRG are NOT eligible for the free excess coverage. 3.No State regulation:  Because RRG’s are formed under LRRA which is a federal statute, there is no State regulation over its premium rates or policy features.  Hence, it is imperative that physicians and health care facilities carefully evaluate the coverage features before deciding on a RRG. 4.Policy types:  Most RRG’s offer only Claims-made coverage.  Only a couple of RRGs in NY & NJ offer both, Occurrence and Claims-made coverage. 5.Hospital approval:  Physicians are urged to contact their affiliated hospitals to ensure that their hospitals accept coverage from a RRG.   More and more hospitals in NY are now accepting RRG insured physicians, although the list of approved RRG’s may be limited with some hospitals. Physicians, healthcare facilities and practice administrators should carefully evaluate their coverage options and understand the various pros & cons of standard carriers vs RRGs before selecting a carrier or plan that suits their needs. For physician groups and healthcare facilities that have practices in multiple states, a RRG would be a good fit because of the ability of RRG’s to write in any State.