Many of our readers will recognize the name, Joseph Murphy. After serving as First Deputy Commissioner from 2006 until 2009, he became Acting Commissioner followed by an appointment as full Commissioner in early 2010. He served as Commissioner of Insurance in Massachusetts from 2010 until 2014.
After eight years at the Division of Insurance, Mr. Murphy left the Division to join the medical professional liability insurer Coverys as the company’s Chief Operating Officer. Last week, however, it was announced that as part of a long-term succession plan, Mr. Murphy would be assuming the leadership of the Boston-based mutual insurance company as CEO and president of the company in April 2021, upon the retirement of current CEO and president, Gregg Hanson. Mr. Hanson is retiring effective March 31, 2021.
While Mr. Murphy’s overarching goal will be to drive forward the company’s long-term strategic plans, Agency Checklists thought it would be interesting to get his thoughts on the state of the medical professional liability field during the COVID-19 pandemic and how he plans to navigate the mutual insurer forward in a post-COVID-19 future. Here is what he had to say:
Congratulations on your new appointment.
Thank you, I am extremely excited.
As I understand it, this been a long-planned transition?
Yes. When I went through the employment process in late 2014, the plan was that whoever came into this role would be a potential candidate for succession planning involving the CEO role. Of course, it was made clear from the start that the board was free to consider other candidates before making a final selection.
Over the past six years, I have had a good opportunity to work closely with the board and get to know them and every aspect of the company. I thought I knew a lot from my previous roles, but I have learned a lot during my time here. It is a wonderful place to work. It is just a great company.
As a mutual, our mission goes beyond just offering the product; it supports and protects the health care community. During the past year, I have felt that we certainly played an important role in that space.
You have been the Chief Operating Officer since you started with Coverys, correct?
Yes. I joined the company in January of 2015, although it has changed somewhat since then. Initially, I did not have claims reporting to me, so the role morphed slightly, but I have always held that specific title.
Could you give a quick overview and introduction to Coverys for those readers who might not be familiar with it?
Coverys is a leading medical professional liability insurance provider dedicated to protecting the livelihood of physicians, hospitals, dentists, podiatrists, and advanced practice providers.
The company started with an Act of the Legislature in 1975, during a medical malpractice insurance crisis. The Legislature established a joint underwriting association with a ‘take all-comers” provision for writing medical malpractice insurance. We still operate in Massachusetts under that mandatory coverage rule even though another legislative act converted the JUA in the 90s to a mutual insurance company. In 2011, the mutual group rebranded under the name Coverys. Since then, Coverys has grown from being a single state mutual insurer to a regional type of insurer, and now I would say an international insurer.
We expanded by acquiring the Michigan Hospital Association Insurance Company in 2009. That company owned another insurance company in Washington state, which we acquired as part of that transaction. As a result, this acquisition gave us a reach beyond the Eastern seaboard. It also gave us further entry into the hospital liability insurance space.
Then in 2014, we bought Preferred Professional Insurance Company, based in Omaha, Nebraska. That transaction allowed us to obtain a 50-state license.
From there, we then went across the pond in 2018, establishing our own syndicate, Lloyd’s Syndicate 1975. We also bought a managing agency for the syndicate. This was an important step in giving Coverys an international reach, as looking at international opportunities has been a part of our growth and diversification.
We are starting small, but we continue to look at opportunities that are similar in kind—for example, looking at Commonwealth countries where the legal and regulatory structure is like our core business here in the States.
How many States are you now operating in?
We are in all 50 states and in the district of Columbia. We conduct international business in London. In addition to England, we also operate in a handful of other countries. We have a partner with an opportunity in Australia and a couple of other smaller opportunities, but our success, I think, has been in measured profitable growth. We are happy with how we have expanded and will continue to explore opportunities as they arise.
Can you share what the breakdown now is between the premium for Massachusetts and the rest of the operation?
In Massachusetts, we have about $72 million in net premium and about $762 million overall. We are still the number one commercial MPL insurer here in Massachusetts.
Those are impressive numbers.
As I look at the numbers in our internal top 10 lists over the last couple of years, what is nice is that we have seen growth in states where we have traditionally been under-penetrated. For example, California and Texas. As it stands now, they both are in our top 10 list for premium this year. California is number four, and Texas made the list at number 10.
We see new opportunities in both different jurisdictions and geographies.
Do you recall offhand what the premium volume was when you came on board?
That is a good question. I am going to say we were about $460 million when I joined in early 2015. As for employee size, we were about 450 employees when I started. Now we are about 750 employees across the entire organization with a total gross annual premium of about $762 million.
What will be your main priorities once you take over the helm?
In 2019, we spent about six months developing our multi-year strategic plan – of which we are in year two.
At the highest level, it is focused on two areas that I do not think are earth-shattering to anyone. The first prong is profitable growth. For Coverys, this means looking at both insurance and non-insurance opportunities. For example, we offer education and other services that are non-risk bearing.
The second prong centers around what we call ‘optimize the core.’ As we have grown and evolved as a company, we want to ensure that our back-end processes are as efficient as they can be – looking at things like making sure we are all on the same core systems and have embedded accountabilities so we can better track our performance.
What about plans for DEI [Diversity, equity, and inclusion] development?
The other piece is continuing work around diversity, equity, and inclusion. We had a company-wide town hall this morning on our initiative, and I think that, like so many others in our industry, there is a need for work on these areas within our company.
I do believe our being a mutual company provides opportunities for us, with our core values being collaboration and connection with the communities we operate in, to help the insurance industry as a whole move further around diversity, equity, and inclusion. So that will also be a priority.
Looking back over the last year, what do you see as the main challenges for Coverys during this pandemic?
One of the things I am happy about is how we pivoted and went fully remote in one weekend in March last year. Prior to the pandemic, we were a very office-based culture office-based company. Some of our units, like risk management, claims, and business development, operated more remotely, but overall, Coverys was predominantly office-based.
Today, there are a handful of essential workers going into some of the offices for mail and checks and things like that, but that is it.
I was surprised how seamlessly we converted to a remote environment because, from an employee engagement standpoint, it is challenging. Depending on where employees are in their life, they might be dealing with an aging parent who is living in their home, and they are concerned about that, or they are trying to help their kids to do Zoom- online learning. Some people say, “It is easy, people are working from home, and they are in their sweatpants.” It has created a level of stress and anxiety for people, however. As such, I think it was a little bit of on-the-job learning for us in management to figure out how do we bridge that divide and make sure employees are feeling connected and engaged.
I am proud of our team. Despite the challenges of moving to a remote environment, we not only met our yearly goals but exceeded them. We ended 2020, notwithstanding the pandemic, with our top-line growth 17% ahead of plan.
Did Coverys have to reduce its workforce at all because of the pandemic?
Fortunately, again the type of company we are, we have had no furloughs or layoffs.
With respect to our insureds, this pandemic has impacted them more acutely than insureds at other insurance companies simply because we insure so many doctors and hospitals. Currently, Coverys insures about 47,000 physicians, dentists, other nurses, other advanced practice providers, and then about a thousand facilities. This includes hospitals, health clinics, and other businesses in the health care field.
Many of our insureds who ordinarily conduct elective procedures had to either shut down or reduce their practices during last year’s shutdowns. We reached out proactively and returned a little over $5 million in premium credits for our insureds who were impacted. Going forward into 2021, with the ebb and flow of the pandemic and procedures continuing to be delayed, we will probably return a couple more million in premium.
And then we assist our insureds on the risk management side as well.
We prepare them with best practices around reopening their offices from a hygiene and disinfection point as well as what they need to do to make sure they are keeping their employees and patients safe. A lot of the work in our risk management department centers on disseminating information to our insureds about what they need to do to survive.
This seems like a major initiative regarding risk management. Is that done on a fee basis, or is that done as part of underwriting loss control?
Depending on the size of the insured, risk management is included in various product suites per insured.
This situation has been frustrating for our risk management team. The team is made of extraordinarily talented and capable people, a number of whom are RN/JDs. Prior to the pandemic, they worked hands-on at physician practices or hospitals, helping them to promote patient safety.
Early in the pandemic, they were averse to remote risk management. We have found, however, that we can deliver a lot more of our risk management work remotely and provide it more efficiently for practices and hospitals. Previously, our team would go into a facility for three or four days, and it is tough to get hospital management’s time. Now we can better schedule meetings to help them figure out what they need to do. Of course, at times, there is no replacement for doing the job in the practice’s office or with a hospital visit. However, we have continued our focus on risk management and patient safety successfully during the pandemic.
I think I know what the acronym was, but could you explain what an RN/JD is?
Yes, I am sorry—a Registered Nurse Juris Doctor. We have got a lot of folks internally who have degrees in both nursing and law.
That is amazing.
Yes. They are a passionate, very experienced group of people. One of them we found out through the pandemic is very experienced with certifications in infectious disease. She has been tremendous in helping us develop content as well as stay on top of developments. With this deep expertise, our education content has morphed from topics such as best practices for reopening the office to research and pushing information on the vaccines to prepare our insureds for the different phases of the vaccination process. We are fortunate to have such a talented team.
Do you see any major transformation in the way Coverys does business because of the pandemic, besides the transition to a more remote-based working environment?
When 2020 started, we had eight physical offices across the United States and an office in London. We had small offices in Morristown, New Jersey, Maple Valley, Washington, and Plantation, Florida. In each of these brick-and-mortar locations, there were maybe 20 to 25 employees. We ended 2020 with five physical offices.
All our employees are still with us; we have not had any layoffs. They are, for the most part, working remotely and, I believe, incredibly happy about how Coverys has maintained its operations during these trying times.
We thought that they would miss going to the office. However, we started to talk to our employees and found some had long commutes. Since these offices’ leases were coming up, it was a natural decision to shrink our real estate footprint a little bit. We are not saying “close the office” – “decommission the office” is the term we use.
Now, we probably would have done that over time, but the pandemic sped up our timeline.
In addition to remote-based working, I think telemedicine will be transformative. Prior to the pandemic, it was limited, but now consumers are used to it. I do not think we are going to go back, but it has created a whole lot of risk management issues for us. For example, providers must make sure they are still documenting things correctly.
Our cases tend to track three to five years later. I expect delayed, or misdiagnosis cases will rise then because of either the pandemic or folks delaying care.
Where do you see the most opportunity for Coverys to grow going forward?
We have only scratched the surface, but we see opportunity in the value-based care space. This involves looking at bundled payments and being able to help providers insure some of the downside risks that they are taking on as payment reform continues to evolve and providers are expected to take on risk.
No matter what people think about the Affordable Care Act, there is movement from fee-for-service to alternative payment mechanisms as healthcare consumers demand that something is done about the cost of healthcare.
I think this transcends the ACA. We are continuing to see opportunities in that multi-billion-dollar space, and Coverys has started to do some related business. Again, it also helps us round out from a total account perspective. We are looking to offer those related services and coverages that our insureds need to help them in their practice of medicine as they try to navigate the future of reimbursements and payments.
Perhaps you could be a little more specific. I am not sure I am grasping the nature of this opportunity. Is this some type of payable insurance?
A few years ago, we invested in a company called Archway Health. They have developed approaches to improve medical outcomes. For example, if you are an orthopedic surgeon, Archway has figured out the best practices to promote better, safer outcomes in doing a knee replacement or knee repair, for example. So, if a practice has a provider contract where if they perform the surgery for $25,000, they can retain a portion of the savings versus (for example) if the surgery were to cost $32,000, so, they figured out the right package of skilled nursing facilities, what doctors have better safer outcomes, and they can put that together and help practices kind of figure out how to deliver better outcomes at a higher quality with a lower cost.
This is important because now, after a series of pilot programs, the Centers for Medicare and Medicaid Services have bundled payment models for practices.
we have seen more and more demand from doctors and practices that are joining these innovative Medicare and Medicaid service programs that compensate the healthcare providers based on what they call “service bundles.” Under these programs, some practices may assume the downside risk as part of that arrangement for cost-overruns.
So, Coverys has offered, coupled with Archway, a product that offers practices assuming service bundle risk insurance against the downside risk they are taking on for performing those services under a service bundle contract.
That is interesting. How do you think your experiences being the Commissioner of Insurance play into your coming leadership of Coverys and these new opportunities?
I asked Gregg [Present President of Coverys] about that. I think we were both surprised that the transition was maybe smoother than we were expecting when I joined the company in 2015. I thought being with an insurer would be a lot different than being with the Division, but it was not. I ran different departments at the Division, and I have different units reporting to me at Coverys.
I think I also learned a lot about healthcare insurance issues while at the Division during the implementation of the Affordable Care Act. The Division had to deal with all the stakeholders, whether it was the Secretary of Health and Human Services, healthcare providers, hospitals, and insurance companies, about this sea change in health insurance. We did a lot of listening sessions at that time to bring stakeholders together so we could learn about the insurance issues in implementing the ACA in Massachusetts. So, you can apply those same principles to the way you deal with similar issues within any organization. I found that experience has helped me be successful.
My mother would always say, as I guess I was a little talkative as a kid, “Joseph, you have two ears and one mouth, so they should listen twice as much as you speak.” That has helped me over the years.
It was a principle I applied as the insurance commissioner. We may not have been able to accommodate every stakeholder, but I listened, and we moved forward in an open, communicative way. Those are lessons that have helped me as I have worked at Coverys and hopefully will help me as we continue to evolve.
What do you see as the main issues now with the medical liability insurance industry or just the whole medical insurance-focused industry?
I think consolidation will continue to be an issue to grapple with. We read a lot about the studies, students coming out of medical schools, and overwhelmingly more than 60%, 70% have no desire to be a Marcus Welby if you will and hang their shingle. They want to be in an employed position.
As you look at the challenges and distractions these new physicians face from a billing standpoint, I mean they must have one full-time employee just devoted to working with health insurance companies. They would rather have an employer deal with all that stuff, so they can really focus on the real reasons they got into the practice of medicine. A lot of the work we do is designed to help our insureds focus on the practice of medicine and take some of those pieces off their plate.
Also, the pace of information and health education is changing more rapidly than people can keep up with. So, I think education will continue to be important. In fact, our education arm is always looking at different ways to reach our audiences in the healthcare space by offering continuing education and other educational programs to help them stay current and relevant with different practice areas.
Again, telemedicine will be a big issue. In the last 10, 11 months, we have probably made more progress in telemedicine adoption than we have in the past five or six years. I think that is here to stay. I am not sure from a technological standpoint or a risk management standpoint that we have caught up with where telemedicine has gone. This is going to be an area with issues on the liability risk side for us and on the technological challenges side for our insureds.
Then profitability for our space, the medical professional liability sector. We saw a continuing soft market cycle. We are now arguably in a hard market cycle and seeing rates firm in certain jurisdictions that will continue to be competitive in our space, even with the hardening market cycle.
Do you have any thoughts generally about the insurance marketplace other than the medical malpractice or the medical area?
I am optimistic.
I think for many people, the pandemic has forced some introspection about life and what they need. Whether that is life insurance or other coverage, I think people recognize the value in having protection for their families, whether it is for their assets, their life, or their health. That has been my experience, whether it was after the marathon bombing in 2013 or hurricanes.
Oftentimes I think our industry gets painted with a broad brush of the big bad insurance company, but the companies are there for their insureds. I am optimistic about the future of our industry, and I am particularly optimistic for mutual insurance companies like Coverys.
Thank you so much for your time, and, again, congratulations on your taking over as CEO of Coverys come April 1.
It was my pleasure.