Council On Insurance Report

Dr. George J. Shia

The AAO Council on Insurance (COI) met in St. Louis on November 15. As your SWSO representative, I am happy to report that the AAO-endorsed Insurance Program is doing very well financially and with continued participation growth. The Council is especially pleased with the number of younger members who continue to enroll at the time of graduation or shortly thereafter.

LIFE, MEDICAL, AND DISABILITY

The Life, Medical and Disability Plans continue to grow with policy counts increasing from 6,430 one year ago to the current level of 6,627.

New York Life presented a proposal for a new 10-year Level Term Life Plan to the COI, which is being sent to the Board of Trustees for review. The rates are very competitive and should result in significant sales at all age groups.

The challenges the Council faces with the Group Health Plan are similar to what the country is currently experiencing with the continued increases in medical expenses resulting in higher premium costs. Premium increases are the direct result of rising health care inflation, especially with costly prescription drugs. Although rate adjustments are necessary to keep the plan financially stable, the Council reviews every aspect of the plan to minimize the amount of the necessary adjustment while keeping the standard of benefits at a quality level.

The overall loss experience of all plans combined for the first half of the fiscal year was very favorable resulting in a significant positive margin for the program. We hope this trend continues through the second half of the year.

Information on the new Long Term Care Insurance service will be sent to members in early 2004. This service is provided by telephone, Internet or mail. A member will be able to secure several personal quotations from the top companies specializing in Long Term Care coverage. This type of policy coverage could be of great benefit to some of our AAO members.

PROFESSIONAL LIABILITY

Continued good news all around as the AAO Professional Liability Plan now has over 3,500 members insured representing just under 50% of the eligible members in the U.S.
In the last 12 months, new business increased by more than 10%, with over 60% of new graduates entering the plan at time of graduation. Enrollment is averaging 6 new policies per week.

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. Look at the comparisons by state of the number of insured members from one year ago to current:

The cost to reinsure the AAO Professional Liability Plan has increased due to the “hard” market trends that continue to affect negatively the malpractice market in the U.S., especially with medical malpractice. Although our plan’s loss experience has been favorable (orthodontists only), the residual effects of the hard market have surfaced in the form of reinsurance premium increases over which we have no control.

The most convincing statistic that proves the AAO-endorsed plan is very competitive is that the plan has a persistency rate of 98.5%. This means that only 1.5% of the currently insured members drop the plan each year. However, half of the 1.5% cancels are due to death or retirement. As a result, less than 1% of all cancellations are lost to the competition.

Over 90% of our insured members carry $1,000,000 / $3,000,000 policy minimums. The AAO Plan offers policy limits up to $5,000,000 if requested. A member may also purchase an endorsement to cover his or her corporation under separate limits for only 10% additional premium. This will provide the corporation with its own limits of coverage, which is strongly recommended for all incorporated doctors to protect their retirement plans from money judgments.

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. However, a 10% premium discount on the BOP plan is credited to all AAO members who are also insured under the AAOIC Professional Liability plan. The Travelers Insurance Company continues to offer very competitive rates throughout the country whether you lease space or own the building that houses your practice.

The BOP Plan covers the member’s office for physical damage to the premises, but also includes general liability, worker’s compensation coverage (optional), vandalism, and business interruption coverage. It is strongly recommended that all insureds carry workmen’s compensation coverage also.

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. 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. The potential exposure to a small, self-employed practice is significant.

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

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