1. The New Med Mal Crisis Where have all the doctors gone?

2. IABA Meeting – August 4 th, 2012 Types of Medical Professional Liability(MPL) Insurance Healthcare Professionals : Commercial carriers Dentists/Oral Surgeons : Smaller specialists and commercial carriers Physicians/Surgeons : Mostly PIAA companies Healthcare Facilities : Commercial carriers Hospitals : Multi-line carriers or self-insurance trusts

3. IABA Meeting – August 4 th, 2012 About Physician Insurers Association of America (PIAA) Formation of PIAA (mid-1970s) Physician Owned/Operated Carriers Medical Professional Liability (MPL) Crisis Availability of MPL Insurance Policyholder Dividends www.piaa.us

4. IABA Meeting – August 4 th, 2012 Historical Healthcare Liability Focus Serve a small customer base Offer a small number of products Compete in a small number of venues …with the coming change in healthcare, does this model still make sense?

5. IABA Meeting – August 4 th, 2012 Premium Comparison Industry Breakdown Medical Mutual Breakdown Source: SNL FinancialSource: Medical Mutual

6. IABA Meeting – August 4 th, 2012 Number of Venues Source: SNL Financial

7. IABA Meeting – August 4 th, 2012 Healthcare Liability Outlook For now, financially strong based on recent results. Fierce Competition in order to retain business. Provider Consolidation/Integration. New and emerging risks from healthcare reform and consolidation will put pressure on loss ratios. …PIAA companies will need to adapt to the new reality.

8. IABA Meeting – August 4 th, 2012 Healthcare Reform Impact Number of Hospitals/Health Systems Decline : Fewer, larger systems Physician Groups Decline : Becoming employees Managed Care/Health Plans Increase : Moving from FFS to more of a Managed Care delivery system Miscellaneous Facilities Increase : Primary Care facilities needed Allied Health Professionals Increase : Growth in nurse practitioners and physician’s assistants Long Term Care/ Aging Service Increase : Population ages

9. IABA Meeting – August 4 th, 2012 Effect of Healthcare Reform on Providers Move from Fee For Service Delivery System –Few incentives to reduce costs –Health care costs exploding –Costs are primary driver of fiscal deficits for federal, state, local governments Pressure on Providers for FFS –Declining Reimbursements –Cost Pressures –Shift in mix of business (aging population, technology requirements, etc.) New system is designed to provide “Population Healthcare”.

10. IABA Meeting – August 4 th, 2012 Advantages of Move to Employment Better reimbursement rates More time for patient care Less time spent on business of practice Work/Life balance Health system view as a necessity for “Population Healthcare”

11. IABA Meeting – August 4 th, 2012 Trend to Employed Doctors Source: AHA Annual Survey of Hospitals

12. IABA Meeting – August 4 th, 2012 Key drivers for Employed Physicians Source: Analysis of AAMC-AMA Survey of Physicians Under 50

13. IABA Meeting – August 4 th, 2012 Impact of Hiring Physicians as Employees Possible rise in frequency and severity? –Previously two separate policies, now Hospital and Physician exposure combined. –Joint-Defense. –Vicarious Liability increased. –Physicians providing care under different venues. Controllability –Consent to Settle claims go to economic buyer. –Claims staff understanding of who controls claim. –Collaboration regarding defense of claims. –What to do with tail exposure?

14. IABA Meeting – August 4 th, 2012 Success or Failure within the market will depend on… Pricing/Reserving Claims/Risk Management Continue to provide best Products/Services Expansion in new Markets/Products

15. Keith Allen SVP, Actuary Medical Mutual 225 International Cr. Hunt Valley, MD 21030 (800)492-0193 kallen@weinsuredocs.com