PBR is the short version name of a company registered as Physicians Benefits Resources Risk Retention Group, Inc. For the past four years, I’ve invested significant time and energy with this company as I was convinced since day one ( and am still) that it had a unique value proposition. This value proposition is significant for physicans in these days of uncertainty as the PPACA comes online nationally.
Until this week, it offered professional liability insurance to physicians. The unique structure of a policy from PBR was that it returned 50% of the premiums paid, every year. This resulted in a “pool of money” accessible to the physician, with some tax breaks, all with the approval of the IRS if done properly. Think of it as cutting premiums in half, and still being fully covered.
This past week, the people who created PBR decided to throw in the towel and call it a day. The concept never gained enough traction among physicians in private practice to allow it to grow and become economically sustainable as a company. This is spite of it being available in all 50 states and with the backing of Lloyd’s of London. For those of us who saw the benefits and advantages of this insurance model, who talked with dozens of physicians, few of whom actually signed up, the question that hangs in the air is “Why not?”.
In some ways, it makes me think of the millions, if not billions, of dollars spent by auto manufacturers worldwide to develop and market an electric car. After all, gasoline is an incrasingly precious commodity, lending itself to the effects of global warming. We’ve been told for years that the supply of gasoline is running out and it’s just a matter of time before the world economy collapses as a result. But in spite of this, people like you and I are not flocking to car dealerships to buy an electric car. Why not?
For one thing, we as a nation are becoming increasingly less dependent on foreign oil to satisfy our needs for transportation. Think “fracking” and the supply of natural gas. For another, understand that the internal combustion engine has been around for over 100 years, is increasingly efficient, and more importantly, part of our national psyche.
Much the same can be said for professional liability insurance that physicians purchase from traditional commercial insurance companies. Premiums have been trending downward for several years now; the culture within medical practices is increasingly conscious of why lawsuits happen and so take steps to eliminate or at least minimize the chances of a lawsuit. Buying coverage from a tradional carrier is the norm and has been for years.
Both electric cars and the PBR model are good ideas, both offer significant benefits over the status quo, and both suffer from acceptance by consumers. Both are good ideas that appeared at the wrong time.
Over these past four years, I’ve spent much time and energy trying to get the attention of decision makers at small hospitals and private medical groups. I’ve shown them that PBR is something they should look at closely and consider seriously. But my efforts have been spotty, at best. But not because I’m a lousy salesman, but because the idea is sufficiently outside the norm that to take a step toward it is uncomfortable.
As a result, I’m going to re-focus my efforts on a step that is short of that offered by PBR but which results in a similar outcome. The underlying idea is to turn revenue that can be expensed and therefore a tax deductible item, into an asset that can be used at a later date, an asset not unlike cash, which can be used for most anything you need, or want, and the tax consequences are favorable to you.
It’s going to be a much more comforable step for those who will benefit, since the elements are increasingly mainstream and understood by lawyers and CPAs alike.
More posts on this will follow as I continue to get my arms around this approach, with the expectation that I can properly articulate how it works and how physicians and business owners in general can benefit. Please stay tuned.