Council On Insurance Report

Dr. George J. Shia

The AAO Council on Insurance met in St. Louis for an all day session on June 5, 2004. As your SWSO representative, I am pleased to report that the AAO-endorsed Insurance Program had one of its most successful years in terms of growth and a lessened loss experience.

LIFE, DISABILITY AND MEDICAL

The Life, Medical and Disability Plans continue to grow with policy counts increasing over the 6,500 mark. When one considers that there are only about 8,500 members in the U.S. and Canada, our total insured penetration rate of 76% is very favorable.

The combined loss experience of all plans for the 2003 fiscal year was excellent resulting in a significant positive margin (profit) for the program of close to $1,000,000. As a result, New York Life and the Council on Insurance recommended that there be NO rate adjustment on any of the plans including the Group Health Insurance Program.

For calendar year 2004, AAO's Group Health plan posted an aggregate rate increase of only 5% which was billed earlier in the year. As a result of the overall favorable loss experience of the plan, no further increase is needed during 2004.

The Council also reviewed information on the new Health Savings Accounts (HSAs) which were approved by the government to replace the Medical Savings Accounts (MSAs). The primary difference is that MSAs were geared for self-employed individuals whereas HSAs are for any individual regardless of work status. The tax advantages of buying a medical plan that is HSA-qualified are significant, plus the pricing of the program is more competitive than the standard traditional and PPO plans. The HSA when carefully studied has many advantages for high earning orthodontists. The AAO will introduce these new HSA programs to our members by September.

Information on the new AAO Long Term Care Insurance service is now being sent to members over age 50. This service is provided by phone, Internet or mail. A member will be able to secure several personal quotations from the top companies specializing in Long Term Care coverage.

PROFESSIONAL LIABILITY

The AAO Professional Liability Plan now has over 3,600 members insured representing just under 50% of the eligible members in the U.S. Participation by SWSO members is the highest of any constituent group with over 72% of all SWSO members enrolled in the AAO Professional Liability Plan.

The most convincing statistic that proves the AAO-endorsed plan is very competitive is the plan has a persistency rate of 97.5%. This means that only 2.5% of the currently insured members drop the plan each year for any reason. However, half of the 1.5% terminations cancel due to death or retirement. As a result, less than 1% of all cancellations are lost to the competition.

AAO BUSINESS OFFICE PACKAGE

The AAO specifically designed its Business Office Package (BOP) so it can be purchased independently, or in conjunction with the AAOIC Professional Liability plan. Additionally, a 10% premium discount on the BOP plan is credited to all AAO members who also carry the AAOIC Professional Liability Insurance. The Council approved the use of several different A-rated carriers in addition to the Travelers Insurance Company, to be certain that members receive the most competitive benefits and rates of all the BOP plans available.

The BOP Plan covers the insured member's office for physical damage to the premises, but also includes general liability, worker's compensation coverage (optional), vandalism, and business interruption coverage.

EMPLOYMENT PRACTICES LIABILITY INSURANCE (EPLI)

This is the newest plan now available to members to protect against suits brought on by allegations of discrimination, harassment, wrongful termination, failure to promote, and other employment practice related incidents. The AAO EPLI Plan includes legal defense, a variety of plan options depending on the size of the practice, excellent risk management benefits and it is underwritten by the Travelers Insurance Company. Any orthodontist with a large staff should seriously consider this coverage.

It should be noted that the type of liability exposures covered by the EPLI Plan are increasing at a double-digit rate in the United States, and are rarely, if at all, covered under a member's practice insurance plan, professional liability plan or homeowner's coverage. This type of lawsuit is very expensive to defend. The exposure to a small, self-employed practice is significant, and adverse judgments are usually very high.

If you need any information on any of the AAO-endorsed Insurance Plans, please call our AAO Insurance Office at 1-800-622-0344.

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