Following a public meeting on April 4, 2019, the Patient’s Compensation Fund (PCF) Oversight Board found the Practice Protection Fund (PPF), a group self-insurance trust, failed to produce satisfactory evidence that the PPF would be maintained in a financially or actuarially sound manner. The PCF Oversight Board revoked and withdrew the approval of the PPF effective May 31, 2019 – meaning many healthcare providers needed to find a new underlying carrier in order to stay enrolled in the PCF. This action resulted in many questions posed to LAMMICO regarding differences between trusts and LAMMICO.
The Louisiana Department of Insurance (LDI) regulates admitted insurers such as LAMMICO. LDI oversight is rigorous. The LDI approves LAMMICO’s rates and insurance policy forms and conducts financial and market conduct examinations, with a formal examination every three to five years. Also, LAMMICO must submit its quarterly and annual financial statements to regulators based on statutory accounting, which has more restrictive standards than traditional GAAP accounting.
Professional trusts formed in Louisiana prior to 2010 are not subject to the same regulation as insurers because they have a special statutory exception that permits them to have minimal LDI oversight. The law was changed in 2010 so that any new trust formed after October 1, 2010 would be subject to more rigorous LDI oversight and regulation, similar to a traditional insurance company such as LAMMICO.
Unlike a regulated insurance company, the PCF treats a trust somewhat similar to an individual healthcare provider who is self-insuring the underlying layer, requiring it to post a minimum of $125,000 in money, a bond or some other form of security.
A trust provides coverage to members, who are usually required to provide a capital contribution to join. Unlike a policy issued by a traditional insurance company, a trust member’s policy is often retroactively “assessable” if the trust is unable to pay its losses/financial obligations. This means that each year (and for an unlimited future time), policyholders could be assessed fees up to the amount of their contribution (though the amount and frequency of the assessment(s) will depend upon the terms of the trust member’s policy documents). If you are a member of a trust, you should review your policy documents to determine whether your policy is assessable.
The differences between an admitted insurance carrier and a trust can be significant with financial and regulatory implications. For this reason, healthcare providers should be well informed about such differences prior to selecting a medical professional liability insurance option.
As an admitted insurance carrier, LAMMICO continues to provide reliable and comprehensive coverage backed by financial strength that is monitored by regulators and has achieved the company an “A” (Excellent) rating from A.M. Best insurance rating agency. Should you have any questions about this important topic, please contact your LAMMICO Regional Marketing Representative.