Tail Insurance for a Nurse Practitioner Explained
What is tail insurance for a nurse practitioner? Anytime a nurse practitioner is employed, they need to have professional liability insurance, also known as malpractice insurance, and depending upon what type of policy it is, they may need a tail insurance. Let’s first break down the different types of policies for a nurse practitioner. Normally, there are two types of main policies. One is called occurrence-based then the other is called claims-made. In an occurrence-based policy, a policy must be in effect when the malpractice occurs. This means tail insurance is unnecessary for occurrence-based insurance. Now, why would someone go with occurrence over claims made? Well, it’s kind of a math equation, but occurrence coverage generally costs about a third more than claims-made coverage.
And I find most employers, maybe some smaller owned physician practices, depending upon what state you are, maybe a smaller nurse practitioner owned practice, if it’s an employer, normally they’ll have a claims-made policy and then they’ll pay for the underlying premium, so how much they pay to insure the nurse practitioner per year, but they may put the cost of the tail insurance upon the nurse practitioner when the contract terminates. Going back to occurrence-based insurance. You do not need tail insurance for that. So, when you do need tail insurance is if there’s a claims-made policy, and that means a policy must be in effect when the claim is actually made. Think of the scenario where an NP leaves an employer. Well, there’s going to be a window from the last patient they see for that employer until the last day that patient can sue the nurse practitioner.
Normally, the statute limitation, so how long a person must sue someone for malpractice, in most states is two years from when you either knew or should have known that the malpractice occurred. There are some exceptions for minors when they become adults and that type of thing, but a general rule of thumb is two years is a standard amount. In that scenario, the NP would need a policy that covers that gap between when they leave and then the last day they can be sued and that’s called tail insurance also known as extended reporting coverage. I find it’s probably more likely than not that if the NP is with a smaller group, they’ll have to pay for the tail. Whereas if they’re with the hospital, hospital network, maybe a large corporate-owned practice, usually the tail costs will go to either hospital or corporation.
So, how much does it cost? Well, tail insurance is around twice what your annual premium is. For most nurse practitioners, their annual premium falls somewhere between 1500 to 2250 per year. Let’s just say, it’s 1500 a year annual premium. You multiply it by two, and tail cost will be around $3,000. Now, this is a one-time payment. You do not need to pay every year that you have tail coverage. And then, there are also different lengths for tail insurance. It could just be a short two-year window, you could have it indefinitely, it could be for five years, eight years, it just depends. And then the longer the tail, the more expensive it is. But as I said before, usually it’s going to be on average twice, but anywhere from 150%, all the way up to 300%. Now, if you’re a nurse practitioner and you’re negotiating an employment contract, this certainly could be something you could look at as far as who pays for the tail costs.
I mean, it’s not prohibitively expensive for a nurse practitioner. However, it still is going to be thousands of dollars that you’ll have to pay. And for NPs that jump around, you don’t want to have to pay two or $3,000 every time you leave a job. This certainly is something you can negotiate with the employer. If they’re unwilling to pay for the entire cost, one thing that we’ve found success in is asking the employer if they would then forgive a portion of it on an annual basis. For instance, let’s just say, we would say to the employer, okay, for every year that the nurse practitioner is employed, you’ll forgive 25% of the tail cost or cover 25% of the tail cost is, I guess, probably a better way of saying it. Let’s say, the nurse practitioner has been there for two years, they leave, then basically, they would split 50, 50 the cost of tail with the employer. And then, if they were to stay there for four years and then leave, then they wouldn’t have to pay for any tail insurance. Another way of having tail paid for is having your new employer pay for your old tail, that’s called nose coverage. Some employers will do that. It’s almost like a signing bonus in some way that they’ll pay for your old tail.
That’s another way of getting out of it. And then lastly, another way of getting out of it is, many times if you stay with the same insurance company, let’s just say you stay in the same state. Maybe there’s one big insurance company that does a lot of the nurse practitioner coverage. If you’re to move from one private physician-owned practice to another, and they use the same insurance company, then that new company would just roll over your old policy into a new one. And then you wouldn’t have to pay for tail. Obviously, in that scenario, it’s impossible to know, however, you’re going to go next if they use the same insurance company, but one you think about. So, that’s tail insurance for a nurse practitioner. I’d say high up on the list of things that people care about when I’m reviewing a contract with them, but it certainly is important to know the basics.
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