Occurrence Based Malpractice (What SHOULD a Physician Choose?)

Malpractice insurance is professional liability coverage that helps protect physicians and other healthcare professionals from financial risks. Associated with lawsuits in which patients believe they were harmed due to an incident involving medical care. The coverage depends on how much the policy is worth (premium). Your specialty – personal injury attorneys are more likely to take cases against doctors working in hospitals than those who practice family medicine or internal medicine in private practice.

Most malpractice insurance carriers provide coverage with a deductible clause that can range between $0 -$100k per incident, 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 carrier’s deductible is usually $5000. Still, it can be higher, sometimes as high as $50,000, depending on individual state requirements and claims history.

Policy Deductibles

However, some states limit how much of a doctor’s income can be subject to such deductibles before buying additional coverage known as “excess” coverage.” The standard excess limit is 50 percent. The doctor will make an annual gross salary.

Malpractice policy provides legal defense coverage to the doctor from medical liability arising from clinical care that results in injury or death. Each policy period limits the maximum amount an insurance company will pay per event. Thus, if your insurance policy has a limit listed of $1,000,000 per occurrence if there is a settlement or judgment, that is the maximum amount your medical malpractice insurer will pay towards claims filed within the term outlined in your policy.

Claims Made Medical Malpractice Insurance

Claims-made medical malpractice insurance is a form of professional liability coverage that protects healthcare providers from malpractice claims, provided that the policy is active during both the time of the alleged incident and when the claim is filed in court. Unlike occurrence-based policies, which offer lifelong coverage for events that happen during the insured term, claims-made policies require continuous coverage to ensure protection against claims. To maintain coverage when switching insurers or upon retirement, healthcare professionals may need to purchase tail or prior acts coverage. Claims-made policies tend to be more cost-effective initially, with premiums increasing over time, making them a popular choice for those seeking initial malpractice insurance protection.

Claims-Made Medical Coverage

A claims-made policy will only provide insurance coverage if the policy is in effect when the incident first happened and when a lawsuit is filed against the doctor. Thus, there is a chance a case can be filed after a doctor leaves an employer. In situations like this, with claims-made medical malpractice insurance, a tail policy must be purchased by the medical provider. It covers the gap between when doctors leave an employer and when the statute of limitations on filing malpractice liability insurance claims ends.

Claims-made coverage is used in cases where there may be periods when coverage is unavailable, such as doctors changing jobs. In these situations, the tail policy will provide coverage from liability for up to three years after leaving an employer. The tail policy also has other limitations and exclusions, making it difficult for doctors who leave employers often. Or have a history of high liability claims against them to find and fund affordable medical liability insurance coverage.

Assuming claims-made coverage is in effect, a good rule of thumb is to tail insurance costs around two times your annual malpractice insurance premium. Thus, if your annual medical premium costs $6000 per year, your cost paid to the insurance carrier would be around $12,000. Your tail insurance cost to the carrier is a one-time payment; it is not an annual cost. 

The physician’s employment agreement will specify whether employers or physicians should cover expenses for the tail insurance if it is claims-made.

Occurrence Based Malpractice

Occurrence-based malpractice insurance is a type of professional liability coverage designed to protect healthcare providers against claims arising from incidents that occur during the policy period, irrespective of when the claim is filed. Unlike claims-made policies, which only cover claims reported while the policy is active, occurrence-based policies provide lifelong coverage for events that transpire during the insured term. This ensures that healthcare professionals are protected against any future claims related to their practice during the covered period, even after the policy has expired or been canceled, offering long-term peace of mind and financial security.

Occurrence Coverage Liability Insurance

An occurrence policy differs from claims-made in that occurrence coverage provides coverage for any claim for an event that took place during the period of coverage, even if the claim is filed after the policy expires. Thus, an occurrence policy does not require tail insurance against new claims.  

The permanence of an occurrence policy is the main advantage over a claims-made policy. The period of time you are protected under the policy lasts forever, and you do not need to renew or buy tail insurance when you leave the employer. You can also work in another state and still be covered by any claims.

Which Choice is Best for Physicians if there is a Paid Incident

Both policies offer the same policy limits issued by the same insurance carrier, along with the same endorsements against claims. The cost of occurrence based and claims-made coverage can factor into a doctor’s decision:

Claims-Made Cost: Suppose claims-made coverage is in effect. In that case, a good rule of thumb is that tail insurance costs around two times your annual malpractice insurance premium. Thus, if your annual medical premium costs $6000, your cost to the insurance carrier would be around $12,000. Your insurance cost is a one-time payment; it is not an annual cost. The American College of Physicians offers resources and information for multiple insurance options through AGIA Affinity for individual doctors and any practice.

Occurrence Cost: Tail insurance is not necessary under an occurrence-based insurance policy. The annual premium for an occurrence-based policy is approximately 35% more than a claims-made policy. So, if the average claims-made policy annual premium is $6000, an occurrence-based policy would cost $8100 in coverage. The cost of insurance coverage should be based upon the claims history of the provider and the number of individual and group clients seen per year. Providers with high annual visit counts (or the number of admitted seen if in-patient) will have a lower insurance premium since their claims are spread out over more people.

A retroactive date defines how far back in time claims can occur for your policy to cover your claim. If a claim happens before the date the insured’s policy is effective, the insured’s policy won’t provide retroactive benefits from the carriers for when the incident occurred. It’s a feature and form of claims-made professional liability coverage.

Occurrence Malpractice Resources for Doctors

The cost of insurance coverage is based upon the claims history of the provider and 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 essential.

Additionally, doctors who perform below average in malpractice insurance claims will pay less than those who incur higher claims. A doctor’s risk profile is also considered when determining the rate an insurance company will charge for the occurrence-based policy. Provider age is also factored into the equation, as younger doctors are considered to be at higher risk of committing acts that could lead to liability or making an error than older practitioners.

Claims Made Malpractice Advantages

• Ability to increase limits or buy new coverage with claims made by malpractice insurance
• Portable and can be moved from one insurance business to another

Occurrence Advantages

• Permanence of coverage to insure. They are protected forever for each year under the policy period.
• No need to renew or buy tail when your employment ends with the occurrence of malpractice insurance makes this an easy decision for many.

Other Blogs of Interest

• What is Medical Malpractice Insurance Coverage?
• Why is Physician Tail Coverage so Expensive? | Tail Insurance

Physicians Contract Review

Contracts are a pervasive and obligatory part of nearly all business and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and 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. While contract drafting and negotiation can be long and arduous, legal representation is a must to protect your rights.

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

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 essential contract terms and clauses which can present complex and diverse issues for any physician, including:

• Non-compete clauses
• Damages
• Indemnification
• Verbal guarantees
• Insurance statements
• Paid Time Off (PTO)

Additionally, often the most effective 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 it is executed.  Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

Advantages of Physicians Contract Review

A thorough contract review can benefit new residents, attending physicians, doctors entering their first employment contract, or established physicians looking for new employment. 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 so that your interests are fairly represented.

Every physician’s contract is unique. However, nearly all contracts for health care providers should contain several essential terms. Suppose these crucial terms in the contract are not spelled out in contracts. In that case, disputes can arise when there is a disagreement between the parties regarding the specific terms. 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?

Essential Terms That Contracts Should Contain

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

1. Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice medicine-related positions?
2. Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
3. Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the Agreement? Is there a yearly review or quarterly review of compensation?
4. Productivity Compensation: If there is productivity compensation, how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
5. Paid Time Off:  How much time off does the job offer? What is the split between vacation, sick days, CME attendance, and holidays? Is there an HR guide?
6. Dues and Fees: Which business financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
7. Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the Agreement is terminated prior to the expiration of the initial term?
8. Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before the initial term is completed? Are student loans paid back? Is there a forgiveness period for student loans?
9. Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
10. Tail Insurance: If tail insurance is necessary, who is responsible for paying for it when the Agreement is terminated?
11. Without Cause Termination: How much notice is required for either party to terminate the Agreement without the case?
12. Non-Compete: How long does the non-compete last, and what is the prohibited geographic scope?
13. Non-Solicitation: How long does it last, and does it cover employees, patients, and business associates?

Suppose you have questions about claims-made or occurrence coverage and your current malpractice insurance. Contact Chelle Law today if you are interested in having your employment agreement reviewed.

How Do You Calculate Tail Coverage? | Tail Insurance Policy

How do you calculate tail insurance coverage? If you are a provider and sign an employment agreement or independent contractor agreement, it may state who’s responsible for the malpractice insurance. And then, who’s responsible for paying the tail insurance coverage expense if it’s a claims-made policy? 

Three Types of Insurance

There are three types of insurance utilized by healthcare providers. One would be claims-made, which you do need tail insurance. The second is occurrence-based coverage, where tail insurance is unnecessary, or you could be working for an extensive healthcare network, and then they would be self-insured. In that scenario, it’s implausible you’d have to pay for tail insurance. This is specific to providers with claims-made policies, and then in the contract, it would dictate that the provider would have to pay for the tail insurance policy after the agreement is terminated.

The Easiest Way to Calculate a Tail Insurance

The easiest way to calculate a tail insurance cost is to take your annual premium. And the annual premium is how much it costs to insure you annually. And then you would multiply that times two. Now, it can vary from one and a half to up to three times, but a good rule of thumb is that it will be twice your annual premium. Now, that’s a one-time cost. If you have a tail policy for, let’s say it’s a three-year period, there would be an upfront cost, which would cover the entire three years. You don’t have to pay every year. So, let’s say you have a $10,000 annual premium. Then the tail cost would be $20,000. Most insurance companies expect the entire amount to be paid upfront. Some of them do offer payment plans, but many of them don’t. 

Few Ways of Getting Out of Paying for Tail Insurance

There are a few ways of getting out of paying for tail insurance. And I think it’s probably a good idea to go through those. One is negotiating before signing the employment agreement, stating that the employer would be responsible for paying the tail cost. That’s the first way. The second way would be your new employer would pay your old tail. That’s called nose coverage. You can think of that as like a quasi-signing bonus in some ways. And then the last way would be that this primarily applies to people in private physician-owned practices. Still, if your new job uses the same insurance company, that insurance company will likely roll over your policy into your new one. Then you won’t have to pay for tail insurance.

Now, you have no idea if you just started a job and where your next job will be. So, that’s not something you can count on, but there are many states where specific specialties, I guess, identify and utilize a particular insurer. And so, let’s say you’re in cardiology. There might be an insurer that caters to the cardiology market. In that way, it might be more likely that you would have the same insurance company if you switched to another physician-owned group, but that’s certainly not something you can bank on. The easiest way to calculate tail coverage is to double whatever your annual premium is.

Annual Premium Costs

Now, most people don’t know what their annual premium is. You need to ask the employer or contact the insurance company to find out what it is. It will vary depending on what state I will be working in. You could be in the same specialty in one state and move to another. And the tail costs vary significantly. It’s primarily based upon the states that have imposed strict caps on the med mal damages. Whereas others, insurance can be much more expensive if there are no caps. Texas, for instance, is a pretty physician-friendly market for insurance, much less costly than in other states. So, you need to think about, alright, In what state will I be working? What’s the environment like for malpractice claims? And then, based upon that annual premium, you’d be able to calculate what your tail cost will be.

What is Claims-Made Malpractice Insurance? | Malpractice Insurance

One of the most frequent things when reviewing a physician’s contract is malpractice insurance, the differences between the different types, and tail insurance. Today, I will talk about claims-made malpractice insurance for a physician. Let’s do some basics on malpractice insurance, precisely, claims-made coverage. Every physician is required to have a malpractice insurance policy. The employer will be the one that nearly always will pay for the underlying coverage. Every year they must pay a premium to the insurance company. And then, if they continue to pay that premium, the physician is covered for their activities for that employer.

Coverage Limit

Most of the time, the coverage limit will be 1 million, 3 million. That means 1 million per claim. And then no more than 3 million aggregate per year. If you have $3 million claims in one year, you have more significant problems than just insurance. You’re going to have some board complaints. You might have a database entry if they settle or lose a trial. So, it’s a bigger problem if someone asks or is concerned about the aggregate limit. 

Types of Malpractice Insurance

There are usually three types of insurance. You have self-insurance programs. Some of the more prominent hospitals and healthcare networks are self-insured, which means they have a lot of money to pay claims. The second would be occurrence-based insurance. And that means a policy has to be in effect when the malpractice event occurs. The benefit of occurrence-based insurance is you do not need tail insurance. The downside is it just costs a little bit more. Generally, occurrence-based insurance costs about a third more per year than a claims-made policy.

Claims-Made Malpractice Insurance for a Physician

And then lastly, what we’re going to kind of detail today is claims-made insurance. A claims-made insurance policy must be in effect when the claim is made. Suppose you are with an employer, terminate the agreement, and leave. In that case, there will be a period called the statute of limitations from when a patient can still sue you. In most states, it’s two years. Even though you’re no longer with the employer and it was a claims-made policy that ended when you left, you need gap coverage. Another policy covers the gap between the last day you work for the employer and the last date where the statute limitations run. And what’s commonly known as tail insurance.

Let’s discuss if you must purchase tail insurance with a claims-made policy. Everyone wants to know, well, what’s the cost? A good rule of thumb is that tail insurance coverage generally costs about twice your annual premium. So, if you have a $10,000 annual premium, multiply those times two. Then you would have to pay $20,000 once your employment contract is terminated to cover your tail insurance. That’s a one-time payment. You don’t have to pay it every year. It’s just that you pay all of it upfront, and then you’re covered for whatever. Some tail insurance policies last longer than others. Generally, you want more than long enough to go past the statute of limitations. Most malpractice claims it’s when the patient either knows or should have known of the malpractice event.

Who Has to Pay Malpractice Tail Coverage?

There are infrequent times, but a patient would’ve no way to know about a malpractice event until years later. And so that’s kind of when this kicks in. Who must pay for tail insurance? If you work for a hospital or healthcare network, most of them will be self-insured, but let’s say they had a claims-made policy. They will generally pay for your tail insurance. Most physicians who have to pay for tail insurance are employed with a private physician-owned group. I’d say it’s probably 75% of physicians who work for a physician smaller physician-owned group that must pay their tail insurance. Is this something you can negotiate? Sure. A couple of thoughts on that. 

You can ask them to outright pay for your tail insurance. If they say no to that, which many of them most likely will, you could also say, alright, well, let’s do it this way. Let’s say for every year that I am employed with you. You’ll agree to pay a quarter of my tail insurance cost. If I finish a year and then leave, you will pay a quarter of the tail insurance. If I stay for two years, you will pay half. And in that way, if I complete 40 years, the employer will pay for the entire tail insurance.

I find some employers understand that that is a fair way of doing things. And then you can play with the annual percentages or how much each party pays. There are creative ways of figuring out how to split the cost of the tail insurance between the physician and the employer. 

Will an Employee Have a Choice Between Claims-Made and Occurrence-Made Policy?

Most of the time, the physician will not have the choice of either getting an occurrence-based or a claims-made policy. Whatever the employer or type of malpractice insurance the employer decides to use, the type of malpractice insurance the employee will have to use. Usually, the physician can’t say, hey, I’d like an occurrence coverage if the employer decides to use claims-made. The reason why the employer uses claims-made is it’s cheaper.

As I said, an occurrence policy is about a third more expensive per year than a claims-made policy. So, suppose you’re the employer, and you’ll make the physician pay for their tail insurance. In that case, you’ll say, not only am I going to save a third per year on annual premium cost, but I’m not going to pay for tail insurance either. Save them some money. There is a kind of math equation. Let’s say you did have the option of choosing occurrence or claims-made insurance. It will be based on how long you decide to be with the employer.

Consideration When Choosing Between Claims-Made and Occurrence-Based Policy

If you have, say, a $6,000 annual premium and occurrence-based would be $8,000. So, $2000 more. The longer you are with the employer, the more that would make sense. If you’re with the claims-made policy, you’re paying $6,000 yearly, or the employer is. Still, in the end, the longer you are with your employer, the tail insurance can sometimes be a little bit more expensive. So, you do need to do the math of, alright, if I’m paying a third more per year, at what point does it make sense to pay if I plan on staying with the employer for ten years? Well, that might make more sense to a claims-made policy. 

Maybe an occurrence policy also makes more sense if you’re there for a shorter time. This certainly is something that you can negotiate in an employment contract. And I do think it’s something that most physicians feel is important. It’s also specialty-dependent. If you’re primary care and paying $6,000 in your annual premium, then $12,000 for tail insurance isn’t that big. Suppose you’re an OB-GYN paying $50,000 yearly for your underlying coverage and must leave. Your tail insurance is a hundred thousand dollars, well. That will certainly get your attention, and you may need to discuss it with the employer.

How to Get Out of Having to Pay for Tail Insurance?

A couple of ways of getting out of having to pay for tail insurance: one, obviously to negotiate so the employer agrees to pay for it. Two, if you are with an insurance company and your new job uses the same insurance company. Then generally, the insurance company will roll over your old policy and tail insurance into your new one. You won’t have to pay for tail insurance. Now, no one’s going to know for sure if they leave a position, the new employer will utilize the same insurance company, but that’s one way of doing it.

And then the last way of doing it is nose coverage. That means the new employer would pay your old tail insurance called nose coverage. And then that would be a way for you to get out of having to pay for it. Nose coverage happens, I would say, infrequently. Still, it’s not entirely unique that a new employer would pay someone’s old tail insurance. So, that’s what claims-made coverage is. It’s a lot of, I guess, complicated scenarios but simple once you break it down into three different types of insurance.