Tips for shopping for a new policy
Medical malpractice insurance has never been cheap, but it’s been rising significantly in recent years. Between 2019 and 2021, 27% to 30% of such premiums rose from the year prior, according to the American Medical Association.
The high cost of these policies may inspire physicians to seek new coverage, but this should not be done hastily or lightly. Experts recommend physicians develop clarity about their existing coverage and accurately assess what coverage is worth having and what is OK to let go. When it comes to medical malpractice insurance, cheaper most likely does not equal better.
Malpractice market experts describe this as a hard market — in other words, a market where rates have increased for several years, underwriting guidelines have tightened and there’s less access to coverage, Brad Ash, senior vice president of underwriting and sales for ISMIE Mutual Insurance Company, said during a Medical Economics 2023 Fall Practice Academy webinar in September. “As early as 2012 and 2013, most of the industry started to see all components of their operating ratios trend in the wrong direction,” Ash said.
Those factors, coupled with economics forces and the impact of high award verdicts, have contributed to the rising cost of coverage. “When you boil it all down,” Ash said, “that’s the reason physicians are seeing their premiums increase.”
Work with a broker
Physicians should not try to figure out how to get better coverage alone, Aaron Richards, healthcare division leader for World Insurance in New York, New York, says. “Number one, make sure you are working with an independent broker that can bring you a quote from all the carriers in whatever state or market you’re in. That’s critical.”
Richards suggests that no fewer than three to five quotes are ideal to understand the variety of coverage that different carriers offer. Additionally, according to John E. Hall Jr, J.D., an attorney and founding partner of Hall Booth Smith, P.C., based in Atlanta, Georgia, a physician can search the top 10 medical professional liability carriers in their area so they have a leg up when the broker returns with quotes.
Look to the future
Preparing to change or renew malpractice insurance isn’t something you want to do just for the short term, Richards says. “You need to understand what your practice is going to look like in a year and in 10 years. Say you’re going to work part time or consider retirement in a few years — all those are things you want to consider that might lead to premium reductions.” Other scenarios that could change the demands of your coverage include discontinuing practicing surgery or, for newer physicians, growing and expanding a practice.
Determine your discounts
Another critical step in shopping for a new policy is to understand what discounts a physician is eligible for, Richards says. Some discounts include a claims-free discount for not having any claims, a discount for being a participating member of a professional medical society, a new practitioner discount for physicians just out of medical school or a discount for moving to part-time work.
“Take advantage of whatever discounts you’re eligible for,” Richards encourages. It may be one of the best ways to save money on a policy.
Assess current coverage limits
Physicians will also need to take time to pore over their existing coverage before they choose a new one, Hall says. “We’re in a very high-exposure world right now for doctors and other medical professionals involved in lawsuits. The amount of these verdicts can sometimes be bankrupting for a physician. So you need to sit down and talk about your coverage level. You want to make sure your aggregate is larger than your exposure.”
Although the average policy for most physicians is approximately $1 million, Hall recommends that surgeons and other at-risk specialties seek something closer to $3 million. “While cheap is good, buying cheap and then getting stuck is not good when you need better,” Hall says.
Cheaper insurance companies often don’t have longevity and may go out of business before a physician’s policy term is up. “Some carriers end in bankruptcy and run off,” he says.
Retroactive coverage and prior claims
Moving from one insurance carrier to another can be risky if a physician is not paying attention to the retroactive date on the policy, Hall points out. The retroactive date assures that the physician is still covered even if they leave their old policy behind and prevents any gaps in coverage. Most policies are claims made. “You really want to be sure when you change carriers, if you have any suspicions of prior claims, you report those to your prior carrier before you go off so that claim is made during the policy period,” Hall says.
Although it’s not often that physicians make a retroactive claim date error, Richards says, “When it does happen, it’s very problematic, and the physician might not know until someone does a review and points it out. By that time, it may be too late to go back and make a change.”
Avoid eroding policies
It’s also important to make sure that a policy is not an eroding policy, according to Hall. “They’ll write a policy for a million dollars, but maybe defense erodes the million. Therefore, by the time you defend a case and go through trial, you may have spent $300,000 in lawyer’s fees and you only have $700,000 left to pay a judgment or settlement. That’s really detrimental.”
Instead, a good carrier will have risk management strategies and training included in the cost, he says. Sometimes these can take the form of continuing education credits.
Protecting your reputation
Just as important as covering a physician financially in the instance of a claim is protecting a physician’s reputation, says Sam Mezzich, president of Coverys Specialty Insurance Company. The way to do this is to make sure the new carrier includes a consent-to-settle clause. In essence, this allows the physician to have a say when the insurance company is ready to make a settlement on a claim.
“If an insurer is too aggressive in settling claims, regardless of whether they could be defensible, that’s where physicians potentially lose some reputational value; the optics are that you’re doing something wrong because you’re settling a claim,” Mezzich says. Because all physician claims are tracked on the publicly accessible National Practitioner Data Bank, it’s important to keep unnecessary claims from making negative marks on a physician’s record.
Other coverage areas
On top of the expected areas of malpractice coverage, Mezzich adds a few others that might be excluded in a typical policy but can be added on as needed.
In a time when so many patient data are computerized and digital, this brings new kinds of liability, Mezzich says. “The front desk is transacting social security numbers, credit cards and all the other patient data, so cyber liability is increasingly becoming a hot area, and you want broad defense coverage on cyber exposure.”
Defense against sexual abuse allegations
Most malpractice insurance policies exclude alleged criminal acts. However, Mezzich says it’s worth adding this kind of coverage to help provide a defense if such allegations are made while providing professional services. “Most of the time, the expense is prominently in defending the claim until it’s proven otherwise,” he says.
The pandemic vastly increased the number of physicians and hospitals using telemedicine, revealing some gray areas and confusion about what treatments are allowed across state lines. Mezzich says, “If you’re buying a policy where telemedicine is restricted in the state of Massachusetts but you’re providing telemedicine to someone across the border in Rhode Island, you might be breaching a territorial limitation. So contractual liability is something you can look into when you assume contractual liability for others in a contract.”
Using non-FDA-approved remedies or treatments
Some physicians may also offer treatments or remedies that are not FDA approved, from devices and supplements to stem cell therapy, Mezzich says. “Now you’re going into that gray area of product liability versus professional liability, and that could be problematic if a claim results from stem cell therapy, for instance.”
When it comes to shopping for a new policy, Hall says, “The first step is finding the broker; second step is determining your exposure and discounts.” From there, every physician will need to take an honest look at their risks and choose accordingly.