The wrong malpractice coverage can cost physicians
For most physicians, malpractice insurance is one of the largest annual practice-related expenses they face, costing thousands of dollars each year. Policies provide financial protection in the event of a claim, and doctors need to regularly review their coverage to ensure they are getting not only the best price, but coverage that keeps pace with their practice.
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With the financial viability of the practice and doctors’ personal reputations on the line, it is imperative to make sure malpractice insurance policies leave no vulnerabilities that could wipe out a lifetime of work, experts say. And there’s no better time to do so than now. Insurance markets are highly competitive, and savings can be significant.
“If a doctor’s risk hasn’t been shopped in five years, they should be able to find a premium differential of at least 15% to 20% compared to the original pricing,” says Daniel Nissi, CLU, president of healthcare solutions at HUB International New England, a multi-carrier insurance brokerage.
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In an era of flat reimbursements, malpractice savings can help offset declining revenue, and a regular review will keep physicians protected as their practices evolve.
Malpractice insurance policies must be renewed each year, and physicians should carefully review their coverage at that time. Because insurance markets are currently so competitive, carriers are looking to expand their product lines and territory, meaning there are deals to be had. “If you are stagnant and not shopping around, you may be losing out,” says Nissi. Some carriers offer online risk-management courses that may provide a price discount, and count toward fulfilling professional continuing medical education requirements.
Physicians can use a competitor’s offer as leverage with their current insurer to get a similar deal, says Mat Kremke, MBA, vice president of the American Osteopathic Information Association, an affiliate organization of the American Osteopathic Association that focuses on practice management. “Find out if there are any other value-added services that they would add to the policy for you,” he says. These may include insurance for cyberattacks, or staff training to better manage patient relationships to avoid lawsuits.
Other items to look for in a policy are sublimits, which are values-usually stated as percentages of the total policy amount-that will be paid for things like assistance with defense of a complaint to a medical board, legal assistance with Medicare or Medicaid fraud lawsuits or help with cyberattacks. Nissi says all sublimits need to be carefully examined so physicians understand their liability and coverage.
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One emerging sublimit area may be of particular interest. Known as emergency medical expense (EME), it covers smaller claims before they escalate. For example, if a doctor chips a patient’s tooth while administering care, it probably won’t result in a lawsuit, but the patient will still want restitution. “Usually, a suit has to be filed for an insurer to provide coverage, but with EME, that isn’t the case,” says Nissi. “The insurer will review the case to see if the doctor was negligent and then settle and pay for expenses before a suit comes about.”
Solo and smaller practices should make sure they have flexibility on whether to settle a case or take it to court, says Kremke. “You need to understand that an insurance company might just want to settle a claim and you need to understand the ramifications of that,” he says. If a physician has strong documentation and wants to take the issue to court, there’s nothing wrong with pushing the insurance company to not settle.
But the policy has to allow the doctor to make that decision, so confirm that is spelled out. Doctors also need to look for the right to choose their own defense counsel, if desired. A policy might state that the insurance company chooses, so physicians need to be aware of that, he adds.
Another reason to review annually is to ensure a malpractice policy reflects the current state of the practice. “Just as time changes things, so does the way you practice or the procedures you perform,” Kremke says. “For instance, as you get older, you may no longer do surgery, and that can affect your premiums. A lot of people forget about changes in a practice, so that’s why you need to look at it yearly.”
Amanda McHale, regional vice president of underwriting for Coverys, a malpractice insurance provider, says if a practice is stable, a review can be pushed out to once every few years, but to be careful not to overlook changes unrelated to treatment. “Anytime there are changes in your practice, such as entering into an agreement with a new facility or bringing on new staff, you need to make sure you are covered,” she says.
Practices using telemedicine need to be especially vigilant, says Caroline Clouser, MBA, executive vice president for Chubb Healthcare, because federal and state laws have not kept pace as the use of telemedicine has grown. Physicians must obtain a license from each state in which they practice, but telemedicine can blur these lines by connecting doctors to patients nationwide. Clouser says that most policies will not cover a doctor practicing outside a licensed area, which may leave them with no malpractice coverage if they treat patients from another state via telemedicine.
Doctors with practices located near state lines and with patients from multiple states also need to verify they have the proper coverage. “Companies handle it differently, but the practice location is usually what matters, not necessarily where the patient is coming from,” says McHale. “The best way to make sure is to assess your situation with your agent or insurance company.”
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As medicine moves toward more team-based care, whether involving physicians in different locations or between physicians and nonphysician providers, it’s another area to review when looking at malpractice coverage. Each clinician should have his or her own coverage, but Clouser advises reviewing all partnership agreements and contracts to make sure each provider is responsible for their own coverage and that a practice is not assuming liability for them.
In the event of a lawsuit naming multiple physicians, the carriers for each doctor would work together to determine liability. “Each physician would be represented by their own counsel, and each policy would pay for not only the defense, but also be responsible for indemnity if a doctor is found negligent,” says Nissi.
The amount of coverage in a policy is typically dependent on what state the practice is located in, but is usually expressed as either “1-3” or “1-4”-meaning a policy covers $1 million for a single claim and either $3 million or $4 million respectively in total claims over the life of a policy.
High-risk specialties may require increased limits, which would be expressed as “2-6” for a policy with a $2 million limit per claim with a $6 million aggregate limit. With such large amounts of money at stake, experts agree that a carrier’s financial health is an important consideration.
“You should be looking for an insurer with longevity and financial stability,” says McHale, adding that the carrier should also offer a range of products and services in the risk-management field.
Experts say while the policy is important, look for a carrier rated at A- or better by A.M. Best, a ratings service that evaluates the financial strength of organizations. It’s also important to be aware of the size of the insurer. “They might be a small carrier and might have an A.M. Best ‘A’ rating, but if they get hit with a couple of large lawsuits, it could be devastating to that organization,” says Kremke, who adds that in addition to financial ratings, physicians should ask colleagues for their experiences with their carriers.
If a physician decides to switch carriers, he or she needs to be careful of coverage gaps when moving to the new policy. Kremke says to check coverage under both the old and new policy before and after the switch and understand what happens if a claim is made for treatment that occurred while under the prior policy.
Shopping malpractice insurance plans each year may not be a realistic option for doctors already pressed for time, and it’s not always easy to compare policies. For those who don’t have the time or interest to review their policies on a regular basis, experts recommend investing in finding a qualified broker to do the work.
“The broker is the best route to go,” says Kremke. “It gives the doctor more flexibility and they will shop the market for you. By having a broker, they will proactively reach out and tell you it’s time to renew the policy, ask questions about if you are doing anything new and adjust your coverage accordingly.”
Look for an agent whose specialty is medical malpractice insurance. “I’m not going to go to someone who sells auto insurance,” Kremke says. “You want to go to someone who specifically deals with medical malpractice as a major line of business.”
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Nissi says that specialized agents represent multiple carriers, understand the nuances of the market and have the ability to write competitive premiums because they have a better understanding of all the credits and discounts available. Like any insurance agent, a malpractice specialist is paid by the insurance companies for sold policies, so there are no additional fees to work with one.
No matter how physicians go about it, the financial stakes of reviewing their medical malpractice policies are too high to ignore. With stagnant reimbursements and rising expenses, says Nissi, malpractice insurance premiums are an area where physicians might find some financial relief.