Medical professional liability expense has two components. The preliminary guidelines for FY2017 budget are as follows:
- To calculate the Funded component: Based on the revised FY2016 premium rates, assume an increase in expense proportionate to assumed growth in clinical practice (e.g. if the budget assumes a 3% growth in insured staff, activity, assume a 3% growth in the funded component of professional liability expense).
- To calculate the Unfunded component, multiply the funded that you calculated above by 3.6%. Budget this in fund 91489M.
Example: The funded FY2016 revised premium rates issued in July 2015 indicate the funded professional liability for the department to be $350,000. If clinical practice growth is expected to be 4% in FY2017, multiply $350,000 times 1.04% and budget $364,000 for funded liability in FY2017. To calculate the unfunded component, multiply $364,000 times 3.6%, which equals $13,104 which would be budgeted in 91489M for FY2017.
Please test your budgeted numbers as follows: total unfunded expense divided by total funded expense should equal 3.6%.
Please note that these assumptions are pending approval by the MPLIC. Dependent upon the receipt of the midyear actuarial report, final FY2017 premium information will be provided by the Risk Management Office in June 2016 and adjustments will be made to the second quarter estimate.
For planning purposes, in FY2018 and FY2019, assume increase in expense proportionate to assumed growth in clinical practice (e.g., if the plan assumes a 3% growth in clinical practice activity, assume a 3% growth in professional liability expense.)