Doctor-owned insurance company offers lower rates


Years after many of the state’s physicians shut their doors to avoid soaring medical malpractice insurance rates, Dr. Warren Volker took matters into his own hands.

In February 2006, the chief of obstetrics and gynecology at Summerlin Hospital launched a doctor-owned and operated medical malpractice insurance firm aimed at retaining quality doctors in Nevada. The company, Premier Physicians Insurance Company, aims to offer more affordable, stable rates.

Already turning a profit, the company has enrolled 132 physicians and is growing, perhaps extending its reach west into California.

Volker, who is chairman of PPIC’s all-physician board, said the company’s narrow focus translates into lower rates because there is “less fat” and fewer administrator salaries than large companies. Volker estimates doctors can save 30 percent to 40 percent on their malpractice insurance premiums by switching.

Volker said malpractice insurance always has been one of the most unpredictable aspects of practicing medicine, although he identified a five- to nine-year cycle in which rates fluctuate as insurers buy market share and take profits.

But after St. Paul Insurance Co. pulled out of the state in late 2001, Volker recalled, “they (rates) went so high, so fast, that it literally put doctors out of business.” His annual rate more than doubled to $82,000 in the wake of Nevada’s then largest departure of medical malpractice insurers. The increase didn’t stop there, either, he said.

Now insured through the firm he helped build, he said he’s paying $87,000 annually, vs. a six-figure quote he received from a competitor. Although he has never been sued, he said he practices in what is considered a high-risk specialty that leds to higher rates for himself and other obstetricians. Volker said a doctor in a lower-risk specialty such as family medicine would pay about $17,000 through PPIC, compared to an annual average of $24,000 elsewhere.

There are several methods PPIC uses to ensure the most prudent management of members’ premiums, such as arbitration, active risk management, practice management courses and other services. Perhaps the most important, Volker stressed, is active risk management.

He gave a real-life scenario: A post-operative patient developed an infection in a wound, which was not covered by his insurance. Volker considered the complication to be a feasible response to the surgery and he said it was cheaper and more ethical to deploy PPIC’s clinical staff to offer the patient home care to treat the infected wound rather than wait for the case to be resolved by the patient’s attorney.

“If a doctor is having an issue in medical care, we don’t wait for the patient to sue,” he said.

PPIC contracts with a retired judge to arbitrate any claims that reach that point. This is in the company’s and the patients’ best interests, because it takes less time to resolve conflicts, Volker said. Additionally, he added, attorneys don’t take as large of share of patients’ settlements.

PPIC has not yet had to settle any lawsuits, and Volker said active risk management has cost only a few percent of the premiums paid in by policy holders. The limited payouts may lead to good news for them in the near future, he alluded. Volker did not wish to disclose the company’s administrative costs.

“We predict that by next year we’ll be giving policy dividends back,” he said.

That would be music to Dr. Eugene Porreca’s ears. A general and vascular surgeon in Las Vegas since 1989, his rates started “somewhere in the neighborhood of $18,000,” he remembered. St. Paul’s pullout changed everything, he said, because decreased competition drove up premiums.

“Somebody gave me a quote of $172,000,” he said. “I said ‘for that price, I won’t practice.’ And for six months, I didn’t.”

His 2002 withdrawal lasted six months until the frenzy subsided. Referred to PPIC by another physician, Porreca switched last month and reaped a 35 percent savings, putting him in the $80,000 range, he said.

“I don’t consider the rates reasonable. But they are affordable,” he said.

PPIC did not offer the cheapest rates in town, Porreca said.

But usually the cheapest company is buying market share and eventually raises its rates, he explained. PPIC seemed interested in their common interest, Porreca said.

“I’m not anti-capitalistic. But since it’s doctor-owned, we’re trying to help each other out for a change, rather than Wall Street,” he said.

Managed by Capstone Management Group, LLC, the millions of dollars Volker said PPIC has in its coffers are placed in First Mutual Bank. Approved by the State Insurance Division, the Reno-based bank’s experts advise PPIC’s board on its investments.

Volker declined to disclose the company’s profit margin, but said the board has opted for a conservative investment approach as it establishes itself. In the future, he predicted PPIC would diversify into some higher-risk investments, netting subsequently higher returns.

Volker said not every doctor qualifies for PPIC coverage, adding that having only the best doctors will limit liability. He estimated that 25 percent of those who apply are turned away.

Having been sued does not necessarily preclude any physicians, Volker said. Porreca has been sued four times. All the cases were settled and never went to trial, he said.

And unlike before, when claims against him spelled increased rates regardless of outcome, Porreca has been ensured he will not endure such punishing measures.

“PPIC says they won’t do that. That, too, remains to be seen,” he said. “Not only would I be surprised (if they didn’t increase). I’d be thankful.”
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