One thing I’ve noticed CRNAs overlook, particularly ones that are hospital based and are only looking to moonlight, is that they don’t know the difference between admitted insurance companies and non-admitted insurance companies (e.g., risk retention groups). Then again, neither do I, but I’m going to try my damnedest to explain it in simple terms.
Admitted Insurance Coverage
So, what exactly is admitted insurance? It’s a type of insurance that’s approved, regulated and guaranteed by a state insurance department in the state in which the insurance company operates.
The approval process involves complying with regulations as defined the state insurance department. Put simply, an insurance company submits information about the premiums and coverage it intends to offer to its clients. Once approved (i.e., admitted), the premiums and coverage offered through the carrier remain fixed; meaning the insurance carrier cannot change the terms of its policy with its clients.
With an admitted insurance policy, part of the premiums go into a state guarantee fund. All admitted insurance policies contribute to this fund. The purpose behind this stems from a provision in which the state insurance department commits to providing emergency coverage in the event that the insurance company becomes financially insolvent and is unable to manage its existing claims. So, basically, a huge Piggy bank in case you know what rolls down hill.
Another major advantage offered through an admitted carrier is unlimited tail coverage if you’re carrying a claims-made policy. In other words, you have an unlimited amount of time to report a claim if you’re carrying coverage through an admitted carrier. You can report a claim whether it’s one year or three years from an incident.
Admitted insurance carriers are thus subject to regulatory oversight, contribute to a state guarantee fund to protect clients from an insolvent company, and due to the regulations set forth by the state department of insurance, must also provide broad coverage options. All in all, sounds like a pretty good deal. So, what’s the catch? The premium for coverage is expensive. Like with all types of insurance, it boils down to your tolerance for risk. If you want comprehensive coverage, then you know it comes at a price.
I’m sure you can surmise that a non-admitted insurance is the exact opposite of an admitted insurance policy in that it does not comply with state regulations. In other words, there is a lack of regulatory oversight with non-admitted insurance policies and there is no access to a state guarantee fund. Non-admitted insurance carriers often operate outside of the state in which coverage is provided and generally, these types of insurance policies are of the claims-made variety, so you’ll have to purchase a tail for extended protection.
Given the disadvantages listed, why would anyone want to purchase a non-admitted policy? One of two reasons. (1) You’re choosing malpractice coverage based off of price alone. As much as I hate to say it, I think a lot of people who moonlight tend to base their decisions off this metric. What’s the point of paying a huge premium for coverage if it’s going to eat up all that extra 1099 income you’re generating in private practice? You might as well work overtime with your W2 job. (2) You were denied coverage by an admitted carrier due to a perceived risk in your application. Non-admitted carriers do not have stringent requirements for coverage compared to their admitted counterparts, so if you’ve been denied coverage from the former, it would make sense for you to try to find coverage with the latter.
Unlike the unlimited tail coverage provision offered through an admitted carrier, non-admitted carriers usually allow a one year period to report a claim. Once that period has passed, coverage is typically denied.
Evaluating Insurance Companies
AM Best’s Insurance Reports is the definitive ratings system to use in order to evaluate the quality of an insurance company. The corollary to Best’s Insurance Reports is Consumer Reports for consumer goods. High ratings are classified as B+ to A++, while ratings of D to B- ought to raise concern and potentially avoided.
There really isn’t a right or wrong answer in terms of selecting coverage. At the end of the day, determining which insurance policy you want boils down to your financial situation and your risk tolerance.