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What Individual Healthcare Providers Should Know About Malpractice Insurance

Posted by Erick Cutler, CPA on Apr 16, 2019 7:40:00 AM

Individual healthcare practitioners are not immune to the need for medical malpractice insurance. Although it’s one of the highest costs of practicing medicine, every physician must seek protection against accusations of wrongful practices, which can include bodily harm, extensive medical expenses, and wrongful death, among other allegations. As a solo practitioner, you also want to be sure to preserve your reputation and ensure you can continue to earn a living, even in the midst of legal action. It is essential that you understand what your options are for dependable protection.

According to the American Medical Association, 34 percent of physicians have had a claim filed against them at some point during their careers; independent contractors have a slightly higher rate of claims at 37 percent. 

Costs

The cost of medical malpractice insurance varies according to your specialty, region, experience, and record of past malpractice lawsuits. Typically, costs are higher for physicians in procedural specialties, such as obstetricians, who may pay more than $150,000 in annual premiums.

Conversely, those physicians whose practices don’t have as many of these higher-risk procedures may pay $50,000 in annual premiums. To assess your liability risks, your insurer should review your specific personal and practice needs and then explain the best coverage options. 

Coverage

While every policy is different, independent medical malpractice insurance policies typically include the following expenses:

  • Compensatory and punitive damages
  • Court costs
  • Arbitration
  • Medical damage costs
  • Attorney costs

For solo practices, insurers will typically provide entity sharing policy limits at no extra cost to the healthcare professional. Keep in mind that you are liable for the acts of your employees. You either must cover your employees under your policy, or they need to maintain their own coverage. Entity coverage has its own policy limits.

Should you lose a lawsuit, the maximum amount – or aggregate – that an insurance policy will pay out typically excludes the cost of litigation and attorney fees. Generally, you can expect the aggregate to cover $1 million per occurrence and $3 million a year for an independent physician. 

The Tail and the Nose

What happens to your policy if you decide to move into another clinical practice? You still need to be protected for any legal costs that arise from your previous practice. Fortunately, there’s coverage to protect you. “Tail” coverage protects you from any legal action that comes up for a set number of years after you have left a practice and discontinued your medical malpractice policy. This insurance is purchased from your previous insurer and covers you only for events that took place when you were covered under that policy. This can come in handy for physicians who are nearing retirement age or plan to practice in another capacity.

Like tail coverage, “nose” coverage covers you for your former practice. The difference is that your new insurance policy provides the protection.  

Choosing an Insurer

You’ll want an insurance provider who has a history in the state in which you practice and experience in your area of specialization. Your provider should be able to streamline the underwriting process to provide cost-efficient coverage. While price is top of mind, you should also consider which other services the carrier may provide to you, such as risk analysis and policy review. It may be worth paying a higher price to receive these extra services. You’ll also want to understand the full scope of your policy and any exclusions. For example, does the policy exclude HIPAA liabilities or cyber breaches?

Check the insurer’s rating—independent physicians should select a carrier with an A.M. Best rating in the “A” range. Class size ranges from I to XV—the smaller numbers refer to the size of the company. Even if the carrier has an “A” rating, keep in mind that too many large losses could sink the company if it is either too small or has experienced several losses.

Other considerations include the provider’s history is in aggressively fighting claims. Does it have a good history of early conflict resolution? Such resolution can help you prevent issues from escalating into claims that could harm your reputation.

These are just some of the malpractice insurance considerations for the independent medical practitioner. While you’d rather focus on providing the best care to your patients and growing your practice, remember that even the most competent doctors can make a mistake, or have accusations of malpractice leveled against them. The liability risk for a physician is significant. Whether you’re at fault or not, a lawsuit can be expensive and draining. A malpractice insurance policy is critical to the long-term viability of your practice.

Have questions about protecting your practice or increasing the profitability in your medical practice? Contact Erick Cutler at 214-635-2541. 

Note: This content is accurate as of the date published above and is subject to change. Please seek professional advice before acting on any matter contained in this article.

Topics: Medical Malpractice Insurance