There isn't a physician, hospital, nursing home, or other healthcare provider that hasn't seen medical malpractice premiums fluctuate wildly while insurance carriers come and go.  This instability creates enormous uncertainty for healthcare providers' budgets and their ability to deliver affordable health care, particularly in "high risk" practices such as obstetrics, neurology, and surgery in which insurers are wary.   Nursing homes are not immune either: professional liability premiums increased from $375,000 to $1.2 million in one year for a group of nursing homes before they became our clients and formed their own risk retention group.

Recently, a healthcare provider asked us to compare the costs of forming and operating a Montana captive insurance company to its current insurance program underwritten by a Vermont-based risk retention group.  We analyzed the RRG's regulatory filings and found that the healthcare provider's annual premiums were subsidizing over $450,000 of the RRG service provider expenses (these expenses excluded any reinsurance which wasn't offered by the  RRG).  We projected that forming a Montana captive insurance company would reduce these expenses by 80% at least. 

Our curiosity led us to review another Vermont RRG insuring similar healthcare providers in the region, where we found the RRG service provider fees were even higher than the first. In fact, had our client been insured by the second RRG, it would have been paying over $1.2 million per year in RRG overhead expenses!  Obviously, if our client formed its own captive insurance company, it would save money immediately and year-after-year by significantly lowering expenses and thus lowering its medical malpractice premiums. 

Further, our client expressed concerns over the Vermont RRGs unwillingness to insure certain healthcare procedures, resulting in coverage gaps.  The RRG also requires its insureds to obtain pre-approval for claims settlements.  In comparison, our client would have total control over what risks its captive insures and how captive claims are managed. 

This Total Cost of Risk analyses provides the necessary information to gain senior management support for a  plan to form a Montana captive insurance company to insure this healthcare provider for medical malpractice insurance.         

Since 1986 we've helped healthcare systems, physician groups, and nursing homes stabilize their medical malpractice insurance premiums and gain better control over claims by using captive insurance companies and risk retention groups.