HAPI allocates PIP's actual costs to the membership. The PIP financial
structure is based upon a three tiered pricing strategy, which involves membership
deposits, annual dues and assessments. Each member is assigned one of fifteen
risk classifications, based upon the physician's specialty and the procedures
performed within that specialty.
The membership deposits are placed in a trust
fund, generating income to pay defense costs, settlements, judgments and operating
expenses of PIP. The deposit is a membership fee, which is tax deductible
to the physician and refundable, in accordance with the Physicians' Indemnity Plan Agreement. The amount of the deposit
depends upon the physician's risk classification, and currently ranges between
$8,500 and $49,500. Under HAPI's pricing structure, the physician pays the
deposit in ten, interest free, annual installments.
The members are also required to pay annual
membership dues, which vary depending on the
risk classification. The current annual dues range from $100 for class 1 to
$1,000 for class 7B.
An annual membership assessment is based upon the
claims payments, defense costs and operating costs of the program, with emphasis
given to the Plan's performance over the past twelve months. The total assessment
is then allocated among the members, based upon a risk ratio, which is assigned
to each specialty risk classification. The annual assessments are designed
to be both fair to members and to allow HAPI to remain competitive in the