Concern as Out-of-State Companies Enter NY MedMal Market

Katarina Siegfeld | April 20th, 2016

Medical Malpractice lawsuitThe medical malpractice market in New York State is increasingly marked by a shift to out-of-state providers while local companies struggle. This turn of affairs concerns many who follow the industry as out-of-state providers are not regulated by New York and physicians may potentially be left more vulnerable to malpractice claims, leading to increased premiums and, ultimately, rates for patients.

Until recently, the New York market has been dominated by five major companies, all of which pay in to a fund designed to serve as a safety net if one of the five goes under.  Physicians’ Reciprocal Insurers (or PRI), the second-largest carrier, is in tenuous financial circumstances following its implication in a federal corruption case.  PRI is now weighing a possible sale to a California-based company.  If this occurs, PRI will essentially become a Risk Retention Group (or RRG) as out of state insurers are called, which will have a number of potentially negative implications for the New York medical malpractice market.

The growth of RRGs has some worried

RRGs are not bound by the same rules that govern New York-based companies, including the requirement that they pay into the guaranty fund into which the five major in-state companies contribute. This means that the other four companies will foot the bill, likely passing on the cost to doctors and patients.

The fact that RRGs are not required to contribute also allows them to offer lower rates than their in-state competitors, making them a growing presence in the New York State as physicians’ groups look to lower their bottom line.  However, should they fail, they may leave claimants in medical malpractice suits hanging, as pending cases would be stayed.

Lawmakers, attorneys, and the members of the Cuomo administration have all expressed dismay over the state of affairs.  According to Maria Vullo, the acting superintendent of the Department of Financial Services, the agency is “…very concerned with the rise of Risk Retention Groups in the medical malpractice insurance industry because federal law exempts them from much of the department’s regulatory oversight,” and lacks “… the safety net of the state’s guaranty fund system, which would otherwise significantly benefit both health care providers and tort victims in the event that an RRG becomes insolvent.”

Malpractice insurance in NY

New York used to be unfriendly ground for medical malpractice insurers as it was a state with a reputation for high levels of lawsuits.  In recent years, however, those levels have lowered significantly with  a decline of 32 percent in the value of medical malpractice liability payments, according to the National Practitioner Data Bank. These recent changes have made the state more attractive to RRGs, who offer competitive rates to doctors.

Unfortunately, many physicians may not realize that while RRGs offer lower rates, they may prove to be far riskier.  Sen. Kemp Hannon, chair of the Senate’s health committee, has proposed a bill requiring that medical malpractice insurance be purchased from a New York-based insurer, but it is unclear if such legislation will pass soon or will withstand legal challenges.

In the midst of this shifting state of affairs, it is important that residents considering a hospital negligence lawsuit contact attorneys with a proven track record and in-depth understanding of New York’s malpractice market.

Please contact the offices of The Sanders Firm at 1-800-FAIR-PLAY to set up a free case review.

CapitalNewYork, Growing Concerns Over Shifts in NY Medical Malpractice Market http://www.capitalnewyork.com/article/albany/2016/04/8596203/growing-concern-over-shifts-ny-medical-malpractice-market