What is Claims Made Insurance for a Physician Assistant? | Occurrence or Claims Made for a PA

What is claims-made insurance for a physician assistant? If you’re a PA entering an employment relationship with private practice or physician-owned group, then you will have one of two types of PA malpractice insurance, either claims-made coverage or an occurrence-based policy. An occurrence-based policy simply means a policy has to be in effect when the malpractice occurs. No tail insurance is necessary, you’re covered indefinitely. If you have a claims-made policy, that means a policy has to be in effect when the claim is made. When you leave an employer, there must be insurance that covers the gap between the last day that you saw a patient and then the last day somebody can sue you.

That’s called the statute of limitations. And in most states, it’s two years, although there are some exceptions, which I’m not going to go through today. If you have a claims-made policy, somebody is going to need to purchase tail insurance so that you are covered if somebody sues you after you leave the employer. Now, let’s talk about costs. Tail insurance generally costs about twice what your annual premium is. The annual premium is simply how much it costs to insure you on an annual basis, multiply those times two and that’s a good kind of rough estimate of how much the tail would cost for the PA. Now, who has to pay for the tail insurance is going to be defined in the contract. So, you need to investigate the section regarding malpractice insurance. And then there also will be a section that states, if it is a claims-made policy who will be responsible to purchase tail insurance.

If you are responsible for purchasing tail insurance, it’s a one-time cost. It’s not like every year you must pay for it. And it can vary in price depending upon how long you want the tail. The shorter the tail, the less expensive it’s going to be. The shorter amount of time you’ve worked for an employer, the less expensive it’s going to be. Although I said two times is a good rule of thumb, it could go anywhere from one and a half all the way up to three times your annual premium, kind of based upon those factors. Now, this is something that could be negotiated in advance of the contract. If the employer says, no, we are not paying for your tail, no matter what, one thing we’ve been successful with is maybe asking them to cover a portion of the tail cost for every year that you’re working for them. For instance, let’s say you have a three-year initial term, you would say, alright, for every year that I’ve completed with you, you’ll cover one-third of the cost of the tail insurance if I leave. Other topics of interest include:

• How Much Does Tail Insurance Cost for a Physician Assistant?
• What is Occurrence Based Insurance for a Physician Assistant?

And that way, by the end of the initial three-year term, the employer would pay for the entire amount of your tail. It’s not prohibitively expensive for a PA. I guess it depends upon what kind of specialty they’re working with and who the supervising and collaborating physician is, but usually, it’s somewhere between $2,000 to $4,000 a year. So, the tail cost would be somewhere between 48,000 a year. Why would an employer choose an occurrence over claims made? Well, it’s the cost. An occurrence-based policy is generally about a third more expensive than a claims-made policy. What most private physician practices will do is they’ll offer a claims-made policy that they’ll pay the underlying premium for each year which is a third less, but then they’ll place the burden of the tail cost onto the physician assistant.

PA Professional Liability Insurance Savings

And that way, they not only save a third less on the annual premium, but then they don’t have to worry about paying for tail as well. It’s going to be rare that the PA would have the choice between the two. Obviously, if you’re not paying for it, occurrence-based coverage is a no-brainer. But as I said before, it’s very unlikely the employer will give you the choice. Now, if you are working as an independent contractor, maybe you’re assisting in surgery occasionally, or something like that, and you were responsible for purchasing your own malpractice insurance, that would come into play as far as, alright, what are the different costs between the two? How long do I expect to have this independent contractor relationship with whoever I’m working for? Those are things that you need to think about before purchasing policy to cover yourself while you’re working as an independent contractor.

Now, if you work for a big hospital network, you almost never have to pay tail. Most of the big hospital networks nowadays are self-insured and the tail cost is just covered under whatever kind of policy they have. So, usually, that’s not something you have to worry about if you’re working for a hospital or a big hospital network.

Occurrence Coverage

What is occurrence-based insurance for a physician assistant?  If you’re a PA and you’re working for an employer, maybe a physician-owned private practice, or maybe a small corporate-owned practice, you’re going to have two types of insurance. There’ll be a claims-made policy or an occurrence-based policy. Under a claims-made policy, a policy has to be in effect when the claim is actually made. It’s possible that when you leave an employer, you could get sued after the fact. So, you would need what’s called a tail policy that covers the gap between the last date that you saw a patient for the employer, and then the last day that somebody can sue you.

That’s called a statute of limitations and in most states, it’s two years. If you had a claims-made policy, you do need to purchase tail insurance. Now, this blog is about occurrence-based policy and an occurrence-based policy simply means a policy has to be in effect when the malpractice actually occurs. If you have an occurrence-based policy, you do not tail insurance, you are covered indefinitely. Whether the employer offers claims made or an occurrence-based policy is going to be up to the employer. They generally are not going to give the option of one or the other to the PA. They’re going to say, this is the coverage we offer. Several things to think about: an occurrence-based policy is around one-third more expensive per year than a claims-made policy.

Whereas with the claims made policy, as I said before, you must purchase tail insurance and tail cost is usually about twice what your annual premium is. The annual premium is simply how much it costs to insure you on a yearly basis. Most employers will use claims-made insurance because it’s a third less. And then they’ll also shift the responsibility to pay for tail insurance onto the PA. So, they not only pay less per year, but then they don’t pay that big chunk in the end either. If the employer offers an occurrence-based and they’re paying for it, it’s a no-brainer. Obviously, you need to go for that. I mean, one headache that the PA doesn’t have to worry about. If you work for a big hospital-owned network or just a hospital, most of them nowadays are self-insured and almost none of them utilize claims-made coverage, or if they do, they’ll almost always cover the tail costs for the physician assistant. So, really the only time you have to worry about paying for tail insurance is if you were to work for a smaller physician-owned practice, and then they were to shift the burden onto the physician assistant.

Claims Made Physician Assistant Malpractice Insurance

If you do have a claims-made policy and you ask the employer to cover the cost, and they say, no, one effective tool would be to ask them to forgive a portion of that cost over time. For instance, let’s say you have a three-year initial term when you sign your contract, you should say, alright, for every year that I’m employed, you would forgive a third of the amount of whatever the tail cost is. And so, after the three-year initial term, the employer would pay for the rest of the tail insurance. As far as the underlying premium goes, with the occurrence policy being a third more expensive than claims made, that’s something that the employer will always pay for.

If you’re a physician assistant and you’re an employee, you should never pay for your underlying premium. If you’re working as an independent contractor, that’s a different story. Most of the time, if you’re working as an independent contractor, they’re going to expect you to purchase your own tail insurance if you have a claims-made policy in addition to paying for your underlying annual premium. So, you need to do a math equation of, alright, how long am I going to work for this employer?

How much is my underlying premium? And then that can help you decide, alright, I should get an occurrence-based policy, or maybe claims-made makes more sense. I mean, if you’re going to be short-term, an occurrence-based policy makes the most sense mathematically. So, something to think about.

Physician Assistant Malpractice Policy Tail Cost

How much is tail insurance for a physician assistant? First, let’s talk about the different types of malpractice policies. And then we’ll talk about how much it’s going to cost if you must pay for it. First, the setting is important. If a PA is employed by a hospital or hospital network, normally, they’ll either be self-insured or have a claims-made policy, or they’ll cover the cost of tail. Very rarely if you’re a PA and you work for a hospital, will you have to pay for your own tail insurance. It just doesn’t happen very often. Now, if you’re in a private physician-owned practice, it’s more likely than not, that if they have a claims-made policy, that you will be responsible for paying the tail costs.

Most private practices use one of two types of insurance. The first is called occurrence-based coverage. With an occurrence-based coverage, it just simply means the policy has to be in effect when the malpractice incident occurs, and therefore, tail insurance is unnecessary. Now, why would you choose one over the other? Well, an occurrence-based coverage is about a third more expensive, so it’s kind of a math equation of, alright, would you rather pay a third more per year to be insured but not have to pay anything at the end for tail, or is it better to have a third less per year and then pay the tail cost at the end of it? For occurrence-based coverage, you don’t need tail insurance. Now, if it’s a claims-made policy, you do. Claims policy simply means a policy has to be in effect when the claim is actually made.

If a PA is employed, and the agreement is terminated, there’s still a gap in between the last patient that the PA saw at the practice and then the last day somebody sues you. In most states, it’s either two years from either when you knew or should have known of the malpractice incident. There are some exceptions for minors when they become adults. But for the most part, two years is kind of a good rule of thumb. In that scenario, if the PA left the employer and didn’t have a tail policy and was sued two years later, well, they’d be out of luck. They’d have no backup as far as malpractice insurance goes. Almost any employment agreement is going to dictate that one, tail insurance has to be purchased, and then two, who has to pay for it.

How it would work is in the contract, if the PA is responsible to pay for tail, then normally, it will state they have to purchase the tail policy prior to the agreement terminating. Usually in the last week of their employment, they’d make certain that the tail has been secured, and then they’ll have to provide proof to the employer. Tail costs are usually around twice what the annual premium is for the PA. An annual premium is simply how much the employer must pay to insure the PA on a yearly basis. You just multiply that number times two, and then that’s how much the PA would have to pay for tail. It’s a one-time cost. You don’t have to pay it every year, but it does have to be paid upfront.

How much is a normal annual premium for PA because that’s going to dictate how much tail is. Usually, PAs are somewhere between 1500 up to 4,000, depending upon specialty, but I’d say 2,000 is around the average. If you take two, multiply that by two, and tail costs would be around 4,000. A couple of things to think about, one, you certainly can negotiate prior to signing the employment agreement who must pay for tail. If the employer is just simply unwilling to make changes, one thing we’ve had success with is just to say, alright, if the term of my agreement is three years, then the employer will then forgive a percentage of the tail cost per year. So, if you have a three-year term, then maybe the employer would agree to cover one-third of the cost if you stay for one year, two-thirds for two years, and then they’ll pay for all of the tail after three years.

Some employers are willing to do that versus an all-or-nothing type of thing. Another way of getting out of paying for tail insurance would be if your new employer pays for your old tail. That’s called nose coverage. And then another way of getting out of paying for tail is if you stay in the state, the new employer you have has the same insurance company. They’ll just roll over your policy into the new one most of the time. And then you wouldn’t have to pay for tail insurance. It’s not prohibitively expensive for a PA. However, it’s still going to be thousands of dollars that the PA is going to have to pay in one big lump sum. And most people don’t want to do that. As I said before, it’s more likely than not, probably like 75% of all private practice jobs require the employee to cover the cost of tail. Something to keep in mind:

Is this a deal-breaker for most people? Probably not. However, if you’re hopping jobs a lot, you’re still going to have to pay. And the contract says you’re going to have to pay for tail. You’re going to pay for tail every single time. If you’re going to be long-term with an employer, maybe not be that big of a deal if you must pay for it. If you’re going to have a new job every year and you must pay tail every year, well, that could add up over time. And that may be something you really want to make certain that the employer covers or even think, alright, well, if a hospital employee job almost always has the employer pay for tail insurance, then maybe I want to lean more towards hospital or hospital network positions versus private practice where I must pay for it more.

Definitely can be negotiated in advance. Deal-breaker? Probably not, but certainly something to think about. So, that’s a little primer on tail insurance and how much it costs.