There are multiple resources managed by states—including patient compensation funds, joint underwriting associations, and guaranty funds—that support stakeholders in the medical professional liability market.
Patient Compensation Funds (PCF): A state-operated program to provide excess medical liability insurance coverage for eligible healthcare providers.
Eight states currently operate patient compensation funds (with Florida’s standard PCF dissolved in December 31, 2023), many funded by surcharges on the underlying coverage. They vary by state on features such as provider eligibility, coverage details, surcharges, residency requirements, requirements for underlying coverage, and more. Provider participation in these funds also varies by state. It is mostly voluntary in Indiana, Louisiana, Nebraska, and New Mexico, while in Kansas, Pennsylvania, and Wisconsin participation is largely mandatory for most providers.
The compensation available under a patient compensation fund is in excess of underlying coverage obtained by eligible healthcare providers from their liability insurers. The funds also generally limit a provider’s liability to a specific amount. At the time the funds were created, they were seen as an effective way of increasing accessibility to medical malpractice insurance at a reasonable cost.[Schrero]
Visit the ProAssurance Resource Library for a brief history of PCF funds as well as details on participation, coverages, and other details of the existing state patient compensation programs, as well as information about states with birth-injury funds.
Joint Underwriting Association (JUA): A nonprofit risk-pooling association established by a state legislature as a response to an availability crisis in specific types of insurance coverage.[IRMI] It is created as a loss-sharing mechanism combining several insurance companies to provide extra capacity due to type or size of exposure.[NAIC] Participating carriers generally share in the profits and losses associated with the program.[iii]
A number of states have established JUAs to provide medical professional liability insurance for physicians who are unable to obtain affordably priced insurance coverage in the standard marketplace.[IRMI]
Guaranty Funds: A state guaranty fund assumes responsibility for payment of covered claims to protect policyholders from “financial losses and delays in claims payments due to the insolvency of an insurance company.”[NAFA]
Guaranty funds are a solution for protecting insureds if an insurance company becomes insolvent. Initially developed as a single fund for one line, many states now have separate funds for various lines. Now every U.S. state plus Puerto Rico, the U.S. Virgin Islands, and Washington, DC, has implemented a guaranty fund [Investopedia] and all carriers are required to participate in these funds with an assessment of a percentage of their total net premiums.[NAFA]
The Difference
The Difference is an ongoing educational series from ProAssurance, designed to compare and contrast common items in medical professional liability insurance. The side-by-side comparisons make it easy to compare so you can easily pick up the highlights of each.