Tail Insurance for a Nurse Practitioner Explained | Malpractice Tail for Practitioners

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.

Tail Insurance Claims  

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.

Malpractice Insurance Coverage for Nurse Practitioners

What is occurrence-based malpractice insurance coverage for a nurse practitioner?  If you’re a nurse practitioner and you’re out in either private practice, meaning, you’re working for a physician-owned practice, perhaps you own your own practice in a state that allows it, there are going to be two types of insurance that you can utilize. One is called claims-made coverage, and the second is occurrence-based coverage. What is claims-made? Claims-made coverage simply means that a policy has to be in effect when the claim is actually made. You could be with an employer and then the contract would terminate for whatever reason, and then that policy is done. It only covers you for the time when you were there.

Tail Insurance in Your State

So, there would need to be a gap policy also known as tail insurance that covers the gap between when you leave the employer and then the last day somebody can sue you. For most states, that’s two years, and that’s called a statute of limitations. Basically, it’s a limitation on filing a suit against somebody. And for Med Mal claims in most states, it’s two years. And you would need that policy to cover that to your gap so that if you did get sued during that time, you would be covered. Now, as far as tail insurance is concerned, it’s usually about twice what your annual premium is, and your annual premium is just how much the employer pays for you to be insured on a yearly basis. I’d say most NPS, at least their annual premiums are probably around $2,000.

It is specialty-dependent, but let’s just say it’s an FNP, so somewhere between 1500 to 2,500 is a pretty good estimate. Your tail would be twice that if you were responsible to pay for it. So, that’s claims made with tail insurance. Now, this blog is about occurrence-based insurance. An occurrence-based policy simply means a policy has to be in effect when the claim or the malpractice incident occurs. No tail insurance is necessary for an occurrence-based policy. Now, why would someone choose one over the other? Well, it’s the price. An occurrence-based policy is about a third more expensive per year than a claims-made policy, but because you don’t have to pay for tail insurance, it can be a better option for some. And so, think of it this way: if you’re going to be with an employer on a short-term basis, meaning, you start a job and you’re only going to be there for a year or two, maybe you’re an independent contractor and it’s up to you to get the insurance, well, if you had an occurrence-based policy, yes, it’s a third more expensive per year, but you don’t have that two times annual premium tail cost on the end.

Medical Malpractice Claim Tail Coverage vs. Occurrence Coverage Cost

And let’s just say you’re going to be there for two years; your underlying policy is $2,000. If it were an occurrence policy, it’s a third more, so let’s just say it’s around 2,700. If you had to pay that for two years, that’s 5,400, and that would be the total amount that you pay for insurance. So, 5,400 for two years. If you had a claims-made policy, it’s 2000, 2000, which is 4,000, but then you’d have to double that for tail cost, which is 8,000, so then it’s 12,000 total versus what we said 5,400. So, you would come out way ahead if you chose an occurrence-based policy if it’s short-term employment. Now, if it’s a longer-term employment or maybe you’re starting your own practice and you plan to be there indefinitely, a claims-made policy might make more sense in the long run.

Most employers do not give the NP the option. You will most likely have the option if you’re working as an independent contractor because you’re the one that has to pay for the policy. There are a few opportunities where they would pay for your annual premium, but those are rare. But for the most part, you do not have the choice of one or the other. And most employers offer claims made and then put the onus for the tail cost on the provider because it’s cheaper for them, it’s a third less per year for them to pay and they don’t have to worry about the tail cost. So, that’s what occurrence-based coverage is. You do not need tail, but it’s a third more expensive.

Should You Contact an Attorney About Malpractice Provisions in Your Contract? 

Have you ever stopped and wondered if there was a reason why you should perhaps stop and contact a nurse practitioner contract attorney about the various provisions written into your nursing contract? You are not wrong for having this thought. 

An attorney can go over the questions you may have about your contract to ensure that it is a safe contract for you to sign: 

• Does it provide adequate malpractice insurance for you? 
• What are the stipulations attached to the malpractice insurance that is provided? 
• Are there reasons to believe that you should purchase additional malpractice insurance on top of what is automatically provided by your employer?
• Is there anything else that you should ask for from your employer before accepting the position (such as the removal of a non compete)? 

Your attorney is on your side in all of these matters, and he or she will look out for you in ways that no employer ever will. Scanning through contracts to look for anything that might raise a red flag is what these professionals are paid to do. 

Consultation with Chelle Law

Hiring an attorney to go over your contract takes just a short amount of time and a small amount of money to buy you the peace of mind that you want when you dive into a new job. If you would like to get a meeting set up with one of our talented professionals who can go over every aspect of your contract line by line, we strongly encourage you to contact us and let us know how we can be of assistance today.