How Much Does Tail Insurance Cost for a Physician Assistant? | Malpractice Insurance

Written by Robert Chelle
Physician Contract Lawyer

Medical Malpractice Tail

Tail insurance covers the gap between when a physician leaves an employer and when the statute of limitations on filing a medical malpractice claim ends.

Medical Malpractice Insurance

Malpractice coverage is professional liability coverage that helps protect physicians and other medical professionals from financial risks. Associated with lawsuits in which patients believe medical professionals harmed them due to an incident involving medical care.

Costs

The coverage depends on how much the policy is worth (premium). Your specialty – personal injury attorneys are more likely to take cases against physicians working in hospitals. That is, than those who practice family medicine or internal medicine in private practice.

In this article, we’re going to cover:

• How Much Does Tail Insurance Cost for a Physician?
• When Does a Physician Need Tail Insurance?
• Who Pays for Tail Insurance?
• How the Length of Practice Matters
• Solo vs. Multi-Physician Practices
• Medical Employment Contract Attorney

How Much Does Tail Insurance Cost for a Physician?

A good rule of thumb is tail insurance costs around 2 times your annual medical malpractice insurance premium. Thus, suppose your annual premium costs $6000, and your tail insurance costs around $12,000. Your tail insurance cost is a one-time payment; it is not an annual cost.

Malpractice Insurance Cost

The cost of insurance coverage is on the basis of the claims history of the provider. Also, the number of individual and group patients seen per year.

Providers with high annual visit counts will have a lower insurance premium since their claims are spread out over more people.

Thus, the choice of claims-made or occurrence is important.

Additionally, doctors who perform below average in malpractice insurance claims will pay less than those who incur higher claims.

A provider’s business risk profile is considered when determining the rate an insurance company will charge for the occurrence-based policy.

Provider age is also factored into the equation. They consider younger doctors at higher risk of committing acts that could lead to liability or making an error than older practitioners.

When Does a Physician Need Tail Insurance?

Tail insurance Insurance, also known as Extended Reporting Period coverage. The physician must purchase it when a physician has claims-made professional liability insurance coverage. Tail insurance covers the gap between when a physician leaves an employer and when the statute of limitations on filing a medical malpractice claim ends.

Malpractice Insurance Coverage

Most malpractice insurance carriers provide coverage with a deductible clause ranging between $0 -$100k per incident. That is with most doctors opting for higher deductibles due to lower premiums.

A deductible clause in a malpractice policy stipulates that the insurance company will not provide coverage for any expenses incurred by the insured for injuries or damages up to an agreed-upon amount.

A deductible clause in a malpractice policy stipulates that the insurance company will not cover any expenses incurred by the insured for injuries or damages up to an agreed-upon amount per incident.

The typical company’s deductible is usually $5000. Still, it can be higher, sometimes as high as $50,000, depending on individual state requirements and insurance claims history.

Who Pays for Tail Insurance?

The physician’s employment agreement will specify whether the physician or the employer pays for the tail insurance. It is a point of contention in many employment agreement negotiations. It is with resources from both parties advocating for their position in the matter.

Liability Insurance

The use of claims-made coverage is in cases where there may be periods when coverage is unavailable, such as physicians changing jobs.

In these situations, the tail insurance policy will protect for up to three years after leaving an employer.

The tail insurance policy also has other limitations and exclusions. These make it difficult for physicians who leave employers often or have a history of high liability claims against them to find affordable malpractice insurance.

As with any insurance, you must understand what your tail insurance covers before purchasing one.

There are two types of tails – open and closed – each with its benefits and drawbacks.

Length of Practice Matters

One of the most important factors in determining how much you will pay for your tail insurance is how long you have been practicing medicine. If you are starting, your rates could be lower than someone who has been practicing for more than 10 years.

Solo vs. Multi-Physician Practices

The final factor that will determine how much your tail insurance costs is the type of practice you have. Suppose you work in a solo practice. Then your rates will be higher than if you work with another physician or as part of a clinic where there is coverage and indemnity for each other’s errors.

Medical Employment Contract Attorney

Contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the following:

• Responsibilities of the involved parties
• Divide liabilities
• Protect legal rights
• Ensure future relationship statuses

These touchstones are even more crucial when applying their roles to the case of a physician employed by a hospital, medical group, or other health care provider.

Legal representation is a must to ensure that your rights are protected. At the same time, contract drafting and negotiation can be long and arduous.

The present-day conclusion is simple: A physician should not enter into any contract without having a physician contract reviewed by legal counsel.

Find Out More About Physician Contract Reviews

There is too much risk for physicians to take contract matters into their own hands. In addition to the specific professional implications, contract terms can significantly impact a physician’s family, lifestyle, and future. There are many important contract terms and clauses which can present complex and diverse issues for any physician, including:

• Non-compete clauses
• Damages
• Indemnification
• Verbal guarantees
• Insurance statements

Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity-based employment agreements, any physician must have an employment agreement reviewed before execution. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

Benefits that Physicians Get from Contract Review

New residents, attending physicians, doctors entering their first employment contract, or established physicians looking for new employment can benefit from a thorough contract review. By employing an experienced attorney for your representation, you can ensure that you will be able to fully understand the extensive and complex wording included in your contract. By having a complete understanding of the contract, you will be in a better position to decide whether you want to enter into the agreement, which will affect your career life for years to come.

The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. Attorney Robert Chelle will personally dedicate his time. To ensure that you are fully protected and assist you in the contract process to represent your interest fairly.

Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. Suppose these essential terms in the contract are not explicit in contracts. In that case, disputes can arise when there’s a disagreement between the parties regarding a specific term. For instance, if the doctor is expecting to work  Monday through Thursday. And the employer is expecting the provider to work Monday through Friday. Still, the specific workdays are absent from the agreement. Who prevails?

Consultation with Chelle Law

Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of essential terms that contracts should contain (and a brief explanation of each term):

Coming into a new organization with a favorable contract can put the physician in a positive financial situation for years to come. Before you sign the most important contract of your life, contact Attorney Robert Chelle for assistance.

Contact Chelle Law today if you have questions about your current medical malpractice policy or are interested in having your employment agreement reviewed.

Contact Chelle Law Today

Additional Information

Physicians

How is tail insurance coverage calculated as far as the cost is concerned? Let’s first talk about when a physician would need tail insurance coverage, who’s responsible for it, and then the good cost estimate. First, a physician only needs tail insurance if they have a claims-made policy. Claims-made policy means a policy must be in effect when the claim is made. It’s possible that if a physician terminates a contract, there will be a gap between the last day that they work for the employer and the last day that someone can sue them. In most states, it’s called statute limitations.

How long can someone sue you? In most states, it’s two years. So, it’s two years from when the patient knows or should have known of the malpractice. That’s why some incidents can go beyond two years if it would be impossible for the patient to know that a malpractice incident had occurred. Someone needs to purchase tail insurance if a physician has a claims-made policy. And so, in the physician contract, it’s going to say who’s responsible for it. If it doesn’t, that problem needs revision before signing the agreement.

Regarding who pays for it, it depends on where the physician’s employment is. First, suppose a physician works for a smaller physician-owned practice most of the time. In that case, the physician will be responsible for that tail insurance cost.

Circumstances Where Physicians Won’t Pay for Tail

However, suppose the physician works for a big hospital network. In that case, it’s very unlikely the physician will have to pay tail insurance. That is because that hospital network, depending upon the size, will either be self-insured or will always cover the tail insurance for any of the physicians they employ. There is another instance where the physician would not have to pay tail insurance if there’s an occurrence-based policy. Under an occurrence-based policy, a policy must be in effect when the incident occurs. And so, that way, no tail insurance is needed. The difference between occurrence and claims-made is price. An occurrence policy is usually about one-third more expensive than a claims-made policy. So, you’ll pay one-third more per year. But then, you don’t have to pay that big chunk at the end for the tail insurance coverage.

Claims-made is cheaper per year. And when the physician leaves, that tail insurance policy has to be paid. And that’s when that big outlay of cash comes in. How much does tail insurance cost? When talking to a physician, I’ll usually say the best estimates are around two times your annual premium. However, depending on the length of time the physician has been with the employer, it could be shorter or longer. So, I think the best rate range is usually between 150% to 300% of the annual premium for that policy. 

Annual Premium

The annual premium is simply what the employer pays to insure the physician annually. Let’s take primary care, for instance. A good rule of thumb is that primary care malpractice insurance is usually around 6,000 yearly.

It also depends on your state, but just like an overall general estimate, we’ll say 6,000. In this case, let’s say the physician has been there for three years. They terminate the contract and move on to a new job. In that case, the tail insurance cost would be $12,000 or an estimated $12,000. Suppose the physician was responsible for paying for that before their last day of providing care to that employer. Then, they would have to purchase that policy, show proof of that to the employer, and then move on. 

Scenarios Where Physicians Won’t Pay for Tail

There are, I guess, two scenarios where a physician would not have to pay if they were responsible for it. One, they could always get their new employer to pay their old tail insurance, called nose coverage.

Think of it as a signing bonus that the new employer will pay the old tail or if the physician stays with the same insurance company. So, if you’re with one insurance company, your new physician utilizes the same insurer. In that scenario, they’ll generally roll your old policy into your new one. Then you won’t have to pay a tail. As I said before, most of the time, if you’re in private physician-owned practice, the physician won’t be responsible for paying tail insurance. 

Negotiating the Tail Cost Responsibility

Now, there are a couple of ways to negotiate this. Just tell the employer I’d like you to pay for my tail insurance. If they’re unwilling to do that, another scenario would be to split the cost based on how long the physician has been there.

I think one good way of doing it is, let’s say, a four-year term for a contract. Then 25% of the tail costs will be covered by the employer for each year the physician is employed. So, if they’re employed for two years and then leave, they would split the tail costs 50/50 with a new or old employer. That’s one way of doing it. It is important for some specialties, like the higher-level surgical specialties. OB-GYN can have enormous tail costs and needs to be considered. Suppose the physician is an OB-GYN, and they must pay for all of their tails, and they’ve been there for eight years. They could have a tail coverage cost of a hundred thousand dollars, which has to be paid all at once.

That’s a lot of money for almost anyone. So, trying to figure out a way to split the cost of the employers is one of the higher points of negotiation as far as that goes. I hope that was helpful regarding how tail cost is calculated, anywhere between 150% to 300% of your annual premium. The longer you’re there, the higher the range. The shorter you’re there, the lower the range.

Doctors

What are the different types of medical malpractice insurance?  This is a frequent topic that comes up when I’m reviewing a contract. I would say, during med school or training, most physicians are not given a breakdown of the different types of malpractice insurance. So, it’s always a good idea when I’m talking to a physician who is relatively new and doesn’t understand the difference. Just to kind of give a brief breakdown of each one and maybe the pros and cons of each. There are three main types of professional liability insurance for physicians. You have self-insurance programs from big hospital networks, and then most private practices will utilize one of two, either occurrence-based coverage or claims-made insurance.

Three Types of Medical Malpractice Insurance

Self-Insurance

Let’s just kind of talk about three of them. First, self-insurance. Large hospital networks will usually have their own policy in the simplest way: they’ll set aside a pot of money, pay claims out of that. In that circumstance, generally, the physician doesn’t have to worry about purchasing a tail. That’ll be covered by the employer’s self-insurance program. This is great. I mean, it’s great insurance when a physician never has to worry about the tail and doesn’t have to worry about paying for the underlying premium, that is kind of a nice, secure feeling. That’s what most large hospital networks utilize. 

Occurrence-Based Coverage

The next type is occurrence-based coverage. And what that means is a policy has to be in effect when the event actually occurs. Any kind of malpractice event is going to occur while you’re employed with the employer. So, you are covered in perpetuity if an occurrence-based policy is in place and then something happens. The benefit of occurrence-based insurance is that you don’t need to purchase a tail. The downside is it costs more than a claims-made policy. A good rule of thumb is that occurrence is about a third more expensive than claims-made policies annual your premium. So just to give an example, let’s say you have a claims-made policy and it’s 6,000, then your occurrence-based coverage would be around 8,000 per year. There is a math equation that needs to be considered to determine what is the best policy for a physician. And I’ll get into that at the end. But honestly, most of the time, physicians don’t have a choice between an occurrence-based policy or a claims made policy. It’s whatever the employer chooses to provide. That’s what the physician must go for. 

Claims Made 

The last one is claims made. What that means is a policy must be in effect when the claim is made. When someone terminates a contract and they no longer work for the employer, there is still a gap in between their last day of practice with that employer and the last day somebody can sue. That’s called the statute of limitations for malpractice claims. In most states, it’s two years. If there is no policy in effect if a claim is made, then the physician is in trouble. Nearly every employer will require one of the parties to purchase tail insurance. Tail insurance simply covers that gap in between the last day that a physician works for the employer and then the last day somebody can sue them.

Now, it’s two years from when the patient either knows or should have known of a malpractice incident. It’s possible that it can go past two years if there was no way for the patient to know until a few years down the line. I’d say most of the time, if a physician is working for a private practice, small physician-owned group, or something like that, they’re going to have to be the one that purchases the tail policy. There are employers that will pay for it, but I’d say more times than not, the physician is responsible for their own tail. Tail costs about two times what the annual is. So, if a physician has a $10,000 annual premium, you just multiply that times two, and then that’s about how much they’ll have to pay for tail insurance.

Lengths of Tail Policy

It’s a one-time cost, so you don’t have to pay it every single year until the statute of limitations runs. It’s just a one-time cost. As soon as you finish the employer and then you’re covered for that amount. Now, there can be different lengths as far as the tail policy goes, but most of the time the tail policy will simply cover a reasonable amount of time until the statute of limitations is over. Somewhere two to five years. As I mentioned before, as far as the math equation, suppose a physician does have their choice of either occurrence or claims made. Then, you need to think about how long you’re going to be with the employer.

If you’re paying a third more for occurrence coverage per year, but you don’t have to pay tail, then it might make sense to utilize that if you’re going to be there on maybe a short-term basis. Let’s say you’re there for two years, you’re going to pay a third more for two years, but then you don’t have this big one-time cost at the end. If you’re in a claims made policy and you’re going to be somewhere long term, then it might make sense to use claims made. Therefore, your annual premium is cheaper, but then you’ll still have that hit on the end with the tail coverage. Which one is better? It honestly just depends upon the situation. And then certainly, it depends upon specialty.

The Average Cost of Annual Premium

The annual premium can vary wildly. Like primary care, peds or something that could be 6,000 a year whereas OB-GYN. One of the higher-level surgeons, cardiac surgeon, or something like that, could be between 20,000 to 50,000 a year. Then, just do the math on that tail cost. It could be forty to a hundred thousand for their tail. It’s specialty-dependent as well. 

In Conclusion

This certainly is something that we negotiate. When we’re looking at a physician contract, you always must consider, okay, what’s most important to the physician. And then what are the areas that we can work on: more comp, more time off, better bonuses, whatever. But who pays for talent insurance certainly is an important piece for most physicians, especially the ones in those higher-end specialties.

Consultation with Chelle Law

For more information on things to look out for in your physician’s assistant contract, please contact us and let one of our talented lawyers sit down with you and get this all figured out. Our team is more than happy to work with you to get you everything that you deserve out of your contract today.