Risk Management

Message from the Chairman addresses elimination of surcharge for facelift, rhinoplasty, and full body liposuction

Digest, Spring 2013

The story of how OMIC arrived at the decision to eliminate the surcharge for ophthalmologists who perform facelift, rhinoplasty, and full body liposuction (see Eye on OMIC) tells us much about how the company balances the risk of providing coverage for procedures ophthalmologists perform with rates the company must charge to cover that risk. The assessment is difficult for many reasons, the primary one being the need to determine the risk of a given procedure or group of procedures. In assessing risk, one must take into account underwriting guidelines the company uses to determine for whom it will provide coverage. If untrained or poorly trained physicians are allowed coverage, the risk—and therefore the rates—will be high. If the company underwrites physicians who are well trained and who meet acceptable standards of practice, the rates may be lower as long as claims remain at an acceptable level.

Fifteen years have passed since the OMIC Board responded to requests by ophthalmologists to provide coverage for total body liposuction and full facelifts for cosmetic reasons. Initially, OMIC had difficulty setting rates for these procedures because claims data was lacking, and there were no proven underwriting criteria that allowed staff to determine who should be insured. Accordingly, premiums were based on average rates charged by other carriers for cosmetic procedures. OMIC selected a 200% surcharge for coverage of full facelifts and a 160% surcharge for coverage of liposuction. Staff immediately developed underwriting criteria and simultaneously began monitoring claims and tracking incident reports for these procedures. This information was reviewed periodically. Over time, the data confirmed that OMIC’s experience was sufficiently favorable that a rate reduction to 150% of basic premium (i.e., a 50% surcharge) could be adopted. This rate went into effect in 2006. Coverage for rhinoplasty, subject to review and approval of a supplemental questionnaire, adherence to underwriting requirements, and payment of the 50% cosmetic surcharge, was added in late 2008.

OMIC’s conservative approach to underwriting and strong claims performance compared to its peer companies has allowed OMIC to provide coverage for members of the American Academy of Ophthalmology at competitive rates and to embrace new procedures as ophthalmologists begin to perform them. PRK, LASIK, refractive lens exchange, Intacs, facelifts, rhinoplasty, and total body liposuction are examples of procedures OMIC covers at standard rates without surcharge. Elimination of the surcharge means a significant rate reduction for ophthalmologists who perform these procedures. This is good news for those now insured by OMIC and those considering a switch to OMIC and demonstrates how OMIC works on behalf of Academy members to provide coverage at reasonable rates for the work ophthalmologists are doing.

John W. Shore, MD, Chairman of the Board