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• What is a risk retention group (RRG)?

• Why did Congress pass the Risk Retention Act?

• Are risk retention groups regulated?

• What is the Mental Health Risk Retention Group (MHRRG)?

• Who are the stockholders of MHRRG?

• What types of insurance does MHRRG offer?

• What are the policy limits?

• Is MHRRG insurance claims made or occurrence form?

• Is MHRRG insurance cheaper than a commercial insurance policy?

• Can a provider's coverage with MHRRG be cancelled or nonrenewed?

• How does the MHRRG work to improve the loss experience of policyholders?

• What topics are covered as part of the MHRRG Loss Prevention Program?

• Will the losses against MHRRG policies be similar to those experienced by the commercial carriers?

• What will happen to MHRRG's rates if the company loses money? If it makes money?

• Who sits on the MHRRG Board of Directors?

• Who carries out the operation of MHRRG?

• How can MHRRG policyholders be assured that claims will be paid?

• Who can purchase insurance from MHRRG?

• Are there risks involved in participating in MHRRG?

What is a risk retention group (RRG)?

RRGs are an alternative category of insurance company, created by the federal Risk Retention Act of 1986. Under this law, RRGs can be formed by any group of individuals or entities that have similar or related liability risks because they are engaged in similar business activities.

Why did Congress pass the Risk Retention Act?

During the mid-eighties, there was a major crisis in the liability insurance industry, when liability coverage for many consumers, businesses and other organizations became either unavailable or extremely expensive. The Risk Retention Act was Congress' response to this crisis, providing a way for qualifying groups to band together and protect themselves by forming an actual insurance company. Under the law, RRGs are exempt from many of the usual insurance regulations and have certain economic advantages over commercial insurance companies.

Are risk retention groups regulated?

Yes. Under the provisions of the Risk Retention Act, these groups must be licensed and regulated by the department of insurance in the state where the company is domiciled. Once this is accomplished, the RRG can legally operate in other states. Commercial insurance companies, on the other hand, must usually be licensed or approved by each and every state in which they want to operate.

What is the Mental Health Risk Retention Group (MHRRG)?

MHRRG is an operating insurance company, incorporated and licensed in the state of Vermont. Formed through the joint efforts of Mental Health Corporations of America and the National Council for Community Behavioral Healthcare, its sole purpose is to serve the liability insurance needs of behavioral health providers.

Who are the stockholders of MHRRG?

Under the terms of the Risk Retention Act, all stock must be held by those providers that are insured by the group. That means all stockholders are also policyholders, and every provider insured by MHRRG owns part of the company.

What types of insurance does MHRRG offer?

MHRRG provides professional liability, general liability, and directors and officers liability insurance to behavioral health providers. By law, the company is restricted to offering only liability insurance products.

What are the policy limits?

Currently, MHRRG offers one million dollar limits each for the professional liability, general liability, and directors and officers coverage. In addition, defense costs are covered over and above the one million dollar limits. Higher limits of coverage are available separately.

Is MHRRG insurance claims made or occurrence form?

Most MHRRG insurance is "claims made." This means coverage is provided for claims actually made or brought against the insurance policy during the policy period. Prior acts coverage and extended reporting periods are available as options, if needed.

Is MHRRG insurance cheaper than a commercial insurance policy?

Not necessarily. The company manages its business on a fiscally sound basis and has to pay claims like any other insurance company. MHRRG was established to provide a stable, reliable source of liability insurance to behavioral health providers, and price was not the overriding consideration. Nevertheless, many policyholders have reported a savings when compared to their previous insurance carrier.

Can a provider's coverage with MHRRG be cancelled or nonrenewed?

Yes. However, because MHRRG is owned by its policyholder behavioral health providers, there is a "due process" mechanism in place. Providers that pay their premiums will not be cancelled or nonrenewed without first being notified that there is a problem, having the opportunity to present their response to a committee of their peers, and being placed on probation. During the probationary period, MHRRG provides expert consultation to assist in correcting any problems.

How does the MHRRG work to improve the loss experience of policyholders?

The MHRRG is proactive about loss prevention and educates policyholders about the most serious claims that may be encountered as part of professional activities. This ongoing educational series includes training video and audio tapes with associated written presentations, bibliographies, and self-evaluation questionnaires. MHRRG-insured organizations use these materials both to train all existing staff and to orient new employees.‚ In addition, a free risk management consultation hotline is available to insureds.‚ This service is provided to answer questions regarding how liability claims can be prevented.

What topics are covered as part of the MHRRG Loss Prevention Program?

The MHRRG develops training materials based on an analysis of claims experience. These training packages consist of video and audio tapes and written materials to assist policyholders in educating staff. Topics include sexual misconduct, violent acts, suicide, wrongful termination and responsibilities of Directors and Officers.

Will the losses against MHRRG policies be similar to those experienced by the commercial carriers?

Perhaps not. All MHRRG policyholders must participate in the company's Loss Prevention Program. As part of this program, training videos and educational materials have been produced on subjects such as suicide prevention, sexual misconduct, and violent acts. These are areas of frequent and more severe claims activity in the behavioral health field.

What will happen to MHRRG's rates if the company loses money? If it makes money?

If the company loses money, rates will have to be adjusted upwards to compensate. There is no possibility, however, that the company could lose money from unrelated activities, since it has none. Therefore a provider will never pay more premium because the carrier lost millions insuring asbestos producers or the like, a situation that is not uncommon in the insurance industry. If the company makes money, only the policyholders/stockholders will benefit. The Board of Directors would have the options of lowering rates, paying dividends to the policyholder/stockholder behavioral health providers, or setting aside funds to fulfill the company's future obligations. It is likely that the Board would select a balanced combination of these options. In either event, policyholder behavioral health providers, as stockholders, have the benefit of full financial disclosure; information they never have with a commercial carrier.

Who sits on the MHRRG Board of Directors?

Eight of the 11 members are directors of behavioral health provider organizations and one is president of an association of behavioral healthcare organizations that have purchased insurance (and stock) from the company. Two members are experts in the areas of insurance and finance.

Who carries out the operation of MHRRG?

Under the supervision of the Board of Directors, an experienced team of professionals has been assembled to operate the company, including:

• an underwriting management company with decades of experience handling insurance for behavioral health providers;

• a nationally known actuarial firm;

• distinguished attorneys with insurance industry expertise;

• a resident manager with extensive background in insurance regulation and legislation.

How can MHRRG policyholders be assured that claims will be paid?

The company has employed underwriters and actuaries to determine safe levels of retention of risk by the company. Like most insurance carriers, MHRRG is spreading and limiting its risk through the purchase of reinsurance. (Reinsurance companies contractually assume a portion of an insurance company's risk in return for part of the premium.) MHRRG has impressive reinsurers who share its risk.

Who can purchase insurance from MHRRG?

Behavioral health providers may qualify for insurance through MHRRG by a one-time purchase of company stock. In addition, providers must be members of either the National Council for Community Behavioral Healthcare or Mental Health Corporations of America.

Are there risks involved in participating in MHRRG?

There are several potential risks involved in becoming a policyholder/stockholder. Before making the decision to purchase stock and insurance, interested providers should obtain and read the complete offering memorandum, which contains a detailed discussion of the potential risks and benefits of participating as a policyholder/stockholder of MHRRG.