Assessing Your Medical Malpractice Insurance Coverage Options
Medical malpractice insurance may not be an exciting or even pleasant topic, but, needless to say, it's an essential part of the life of today's practicing physicians. An incomplete understanding of policy options or inadequate management of a policy, however, has the potential to destroy entire practices.
Locum tenens physicians who accept assignments through Locum Leaders are provided with medical malpractice insurance for the duration of their assignment — a key benefit of accepting locums assignments with Locum Leaders! Despite its rapid growth, locum tenens staffing is still a relatively new segment of the healthcare industry, and only a handful of few locum tenens staffing providers have been in existence for more than 10 years.
Working with Locum Leaders — a company of AMN Healthcare, healthcare's leader and innovator in workforce solutions and staffing services — means working with a reliable, secure locum staffing firm. It's a way to avoid the risk of individual malpractice insurance, susceptible to risks such as insurance mismanagement; losing coverage when a carrier leaves an area or closes; arbitrary rate increases — all of which can leave physicians suddenly unprotected.
For this reason, it's important to understand the ins and outs of malpractice coverage, particularly if you plan on returning to regular full-time practice later — or are offered permanent employment following a locum tenens assignment.
Medical Malpractice Insurance: The Basics
As you probably know, medical malpractice insurance is simply a contract transferring a provider's professional liability to another third party, which will generally be an insurance company. Like any insurance policy, it's a way to safeguard a physician and practice against the risk of damages. But signing the coverage agreement does not guarantee the absolute security of a physician or practice.
There are a variety of different types of insurance companies — stock, mutual, reciprocal, risk retention group, risk purchasing group, surplus lines, self-insurance programs, to name a few — but only a few types of malpractice coverage. By far the most common types of medical malpractice insurance are:
• Occurrence Coverage. This policy will provide coverage for any incident that occurs during the term of the policy, regardless of when a claim is made. Occurrence policies are "long tail" policies: They ensure coverage for the life of the patient and physician, even if the provider changes careers or the company shuts down.
• Claims Made. Renewed annually, this medical malpractice insurance policy provides coverage for claims that both occur and are reported to the insurer while the policy is in force. An incident occurring during a policy period but reported after its expiration or discontinuation exposes a provider and facility to potentially significant damages, unless "tail" coverage is also in effect. Once a contract period ends, the regular purchase of "tail" continues coverage, if it's not renewed.
Medical Malpractice Insurance: Costs & Considerations
Claims-made policies tend to cost less than occurrence coverage, and so they're a bit more popular. The policies also differ in their distribution of aggregate amounts set aside for the settlement of claims. For example, the aggregate amount covers the term of the policy on a claims-made form. Meanwhile, occurrence malpractice policies make available the full aggregate amount every year, so that the aggregate is not diminished over time.
Many other factors affect the cost of a malpractice coverage policy, though. These include:
• The specialty of the physician or provider. Costs will vary based upon risk exposure.
• The type of coverage, occurrence or claims made.
• Limits of liability: aggregate amounts, deductibles, managed care requirements.
• Loss history.
• Location. Costs vary based on the state, county, city or township.
"The price of malpractice insurance varies dramatically across specialty and geographic area, largely reflecting variations in the expected frequency of claims and award size," wrote Daniel P. Kessler in a medical malpractice study published in The Journal of Economic Perspectives. "For example, in 2009, premiums in Suffolk County, New York, for specialists in internal medicine and obstetrics were $33,000 and $178,000, respectively, whereas premiums in Colorado were approximately one-third as much."
Medical Malpractice Insurance: Components, Clauses & Exclusions
In broad terms, a malpractice contract promises to defend and indemnify on behalf of the insured, while the physician commits to report any claims, and to cooperate with the insurance provider in the investigation and settling of claims, as well as providing provide consent for a settlement.
A medical malpractice insurance contract generally breaks down into several basic components:
• Declarations include the policy number, coverage dates, names of the insured, specialty classification, liability limits, any deductibles, and the premium.
• The insuring clause states the specific intent of the coverage.
• Conditions specify the responsibilities of each party (the company and the insured), as well as exclusions that nullify or reduce coverage.
• Endorsements may also be included at the request of the insured, or mandatory by company policy or state regulation. These either restrict or broaden coverage through riders, terminology changes and by naming additional providers to the coverage agreement.
Common exclusions to a medical malpractice contract include incidents and issues unrelated to clinical care, such as:
• Contractual Liability
• General Liability (e.g., auto, fire)
• Criminal or Sexual Acts
• Claims from Services Rendered Outside Coverage Dates/Locations
When evaluating types of medical malpractice coverage, it's also best to be cognizant of "consent to settle" clauses. Each insurance company classifies itself as either a "consent to settle" or a "pay on behalf" company. What's the difference? "Consent to settle" companies will refuse to settle a case without the approval of physicians named in the lawsuit. "Pay on behalf" companies, however, do not require a physician's consent for the settlement of a claim, nor do they need to notify physicians of any lawsuits.
The result of this "pay on behalf" policy could be that, when applying for licensure, discovering that you have marks against you in a certain state, of which you were not made aware at any point. More than just an unpleasant surprise, unexpected inaccuracies like this can cause significant delays in licensure proceedings — among other problems.
Medical Malpractice Insurance: Questions & Considerations
Putting all this information, then, what are the key questions to ask when evaluating your medical malpractice options?
• Financial Stability. This information should be a priority. Start with the carrier's A.M. Best rating. An A+ or A++ rating should be mandatory.
• State Standards. Is the insurance carrier licensed by the state's department of insurance, and currently in good standing?
• State Records. Call state medical organizations and ask about the insurance company's reputation.
• References. Ask for them! Call them!
• History. How long has the company been in operation? Has its financial status remained steady, or has it fluctuated?
• Services. Look into the company's local policy and claims service, its local defense counsel, its risk management education program offerings, and any information regarding claims management.
• Policy Benefits. Check for a consent clause first! Other important points include peer review coverage, reporting of incidents/claims, vicarious liability, Medicaid/Medicare fraud defense, punitive damages coverage, defense of licensure proceedings, defendant reimbursement, and defense costs outside limits of liability.
Also, note that if another party purchases coverage on your behalf — a hospital, healthcare facility, group or a locum tenens staffing firm, for instance — you should ask what rights you retain regarding:
• Notice from the company.
• Claims management, defense counsel and consent.
• Whether limits of liability are individual or shared.
• Outside work coverage.
• Prior acts coverage.
• Payment of Reporting Endorsement.
• Cancellation of policy.
When it comes to assessing the malpractice coverage offered by a locum tenens staffing firm, there are a few more key questions to consider. First: What are the firm's predetermined coverage limits, and how close is the firm to surpassing those limits? Secondly: Does the staffing firm maintain tail coverage through its current malpractice carrier and all previous carriers?
It's also important to discover each firm's rules regarding state compensation funds. And remember, reputable firms secure coverage through highly rated carriers, with A.M. Best A+ or A++ ratings.
It may take some time to read through and properly evaluate a medical malpractice policy — and its longevity, its rules regarding state compensation funds, etc. — but with the wrong policy in place, it may only take one incident to seriously damage a practice or a career.
Locum Leaders secures superior malpractice insurance at no cost to the physician through an A-rated company, providing at minimum $1 million per loss event and $6 million per physician policy aggregate with continuous coverage. Connect with us here for more details, or search for a new locums assignment here.
This article does not constitute official financial, insurance or legal advice on the part of Locum Leaders.
Adapted from an article originally published on NewPhysician.com.
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