What is Claims Made Insurance for a Physician Assistant?
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.
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.
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