Physician Tail Coverage (Do Doctors PAY with Claims Made?)

Tail Insurance, also known as Extended Reporting Period coverage, must be purchased 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 coverage is a type of professional liability coverage that helps protect physicians and other healthcare professionals from the financial risks associated with lawsuits in which patients believe physicians harmed them due to an incident involving medical care. The coverage depends on how much the policy is worth (premium) and your specialty. Personal injury attorneys are more likely to take cases against physicians working in hospitals than those who practice family medicine or internal medicine in private practice.

Malpractice Claims Coverage Deductible

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

When Should Tail Insurance be Purchased from the Carrier?

Physician’s Expense: If the physician is required (via their Employment Agreement) to pay for tail insurance, the date the tail insurance policy needs to be obtained will be listed. In most instances, the tail insurance policy must be purchased before the physician’s last day as an employee.

Employer’s Expense:  If the employer is required (via the Employment Agreement) to pay for tail insurance, they will dictate when the policy is purchased. It is a good idea to follow up after the employment ends to ensure the employer purchased the policy.

How Much Does Malpractice Tail Coverage Cost for Physicians?

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

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 important.

Additionally, doctors who perform below average in terms of malpractice insurance claims will pay less than doctors who incur higher claim rates. A provider’s business risk profile is also taken into account 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 Physician Insurance

Physician Claims-Made Insurance is a type of medical malpractice insurance purchased from an insurance company that provides legal defense to the physician from medical liability arising from clinical care that results in a patient’s injury or death. Each policy offers limits, the maximum amount an insurance company will pay per event. Thus, if your insurance policy has a limit of $1,000,000 per occurrence, that is the maximum amount your medical malpractice insurer will pay towards any claim filed within the term outlined in your policy.

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 (when the claim is made). Thus, there is a chance someone can file a lawsuit after a physician leaves an employer. In situations like this, with claims-made medical malpractice insurance, the medical provider must purchase a tail insurance policy, covering the gap between when physicians leave an employer and when the statute of limitations on filing a medical malpractice claim ends.

Health Care Employment Contract Attorney

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 necessary 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 simply 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 review an employment agreement before they execute it. Attorney Robert Chelle has practical experience drafting and reviewing physician contracts for nearly every specialty.

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 fully understanding the contract, you will be in a better position to make your own decision on whether or not 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. If the contract does not spell out these crucial terms, disputes can arise when there is a disagreement between the parties regarding the details of the 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?

Crucial Terms in a Contract

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):

1. Patient Care Schedule: What days and hours per week are you expected to provide patient care? What is the surgery schedule? Are you involved in the planning of your schedule?
2. Locations: Which facilities will you be scheduled to provide care at (outpatient clinic, surgical sites, in-patient services, etc.)?
3. 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?
4. Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
5. 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 an annual review or quarterly review of compensation?
6. Productivity Compensation: If there is productivity compensation, how is it calculated (wRVU, net-collections, patient encounters, etc.)? Is there an annual review?
7. 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?
8. Dues and Fees: Which business financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
9. Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the agreement is terminated before the expiration of the initial term?
10. 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?
11. Professional Liability Insurance: What type of liability insurance (malpractice) do they offer: claims-made, occurrence, self-insurance?
12. Tail Insurance: If tail insurance is necessary, who is responsible for paying for it when the agreement terminates?
13. Without Cause Termination: How much notice is required for either party to terminate the agreement without-cause?
14. Practice Post-Termination Payment Obligations: Will you receive production bonuses after the agreement ends?
15. Non-Compete: How long does the non-compete last, and what is the prohibited geographic scope?
16. Financial Retirement: Is a financial retirement plan offered?
17. Non-Solicitation: How long does it last, and does it cover employees, patients, and business associates?
18. Notice: How is the notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?

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

Other Blogs of Interest

• 3 Ways a Physician Can Get Out of Paying for Tail Insurance
• How Do You Calculate Tail Coverage?

What is Tail Coverage for Physician Malpractice Insurance? | Physicians’ Medical Malpractice

Tail Insurance, also known as Extended Reporting Period coverage, must be purchased 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. 

Medical Malpractice Coverage

Malpractice coverage is professional liability coverage that helps protect physicians and other healthcare professionals from financial risks. It is 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 physicians 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 company’s deductible is usually $5000. Still, it can be higher, sometimes as high as $50,000, depending on individual state requirements and claims history.

How Much Does Tail Coverage Cost?

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

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 provider’s business 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.

Who Pays For Tail Medical Malpractice Insurance?

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

Claims-Made Coverage

Claims-made coverage is used in cases where there may be periods when coverage is unavailable, such as physicians changing jobs. In these situations, the tail coverage policy will protect for up to three years after leaving an employer. The tail policy also has other limitations and exclusions. It can make it difficult for physicians who go to 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 covers before purchasing one. There are two types of tails – open and closed – each with its benefits and drawbacks.

How Can a Physician Avoid Paying for Tail Medical Malpractice Insurance?

• Negotiate for the employer to pay for it in the Employment Agreement.
• Have your new employer pay for your tail coverage(nose coverage).
• Stay with the same insurance carrier, and the tail coverage will get rolled into a new policy.

Claims-Made Insurance Policy

Physician Claims-Made Insurance is a type of medical malpractice insurance purchased from an insurance company. Provides legal defense to the physician from medical liability arising from clinical care resulting in a patient’s injury or death. Each policy provides 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, that is the maximum amount your medical malpractice insurer will pay towards any claim filed within the term outlined in your policy.

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

How Long Does Tail Coverage Last? | Tail Insurance

How long does tail insurance last? When reviewing a contract with a physician, the medical malpractice policy and potential payment of tail insurance, if necessary, is always a big discussion point. Let’s briefly go through what scenario a physician would be responsible for tail insurance, the cost of it, and then how long it lasts. There are two main types of medical malpractice insurance. You have the occurrence-based and claims-made. In a claims-made policy, a policy must be in effect when the claim is actually made. A physician can leave an employer and then be sued two years later. And since they are no longer employed and that policy has ended. They need a gap policy covering the last day they saw a patient with the employer, and then the last day they can be sued.

In most states, the statute of limitation is two years. However, there are some exceptions that we’ll get into as well. If it’s a claims-made policy, someone must pay for tail insurance. And in an occurrence-based policy, no tail coverage is necessary. It just means a policy must be in effect when the malpractice occurs. The main difference between claims-made and occurrence is that occurrence is usually about a third more expensive. The physician or the employer must decide whether to pay a third more per year for malpractice or pay a little bit less but then have a big chunk on end for tail insurance. Let’s say a scenario where the physician is responsible for paying tail insurance. The contract ends with the employer. The physician is responsible for purchasing the tail insurance policy.

Considering How Long Does a Tail Coverage Last

A good rule of thumb is that it’s usually around twice the annual premium for the physician. The annual premium is how much money must be paid each year to insure the physician for medical malpractice. Just multiply that by two, and that’s usually a good ballpark of what the physician will have to pay for tail insurance. Now, a couple of considerations as far as how much it costs. One is the length of the policy. Once again, most states have a two-year statute of limitations. However, it’s two years from when the patient either knows or should have known of the injury. And then there are also some exceptions for minor patients to be able to see once they reach the age of majority. In that situation, sometimes, a longer tail insurance policy makes sense. Tail insurance can be one year, two years, five years, or ten years. 

There are also unlimited tail insurance policies. Meaning it just goes on forever. And if any claim arises in the future, the physician is covered no matter when it’s filed. Now, why would a physician pay less or more? Simple, it’s cost. Like normal tail insurance, let’s say that covers five years would probably be around twice the annual premium. An unlimited policy may cost more than that. So, if the physician is responsible, they need to think about, alright, what’s my liability here? 

How Can You Be Exempted from Paying the Tail Insurance?

What’s the potential for me being sued? Certainly, what specialty they’re in, I think, is important as well. And then they can make a financial decision. Now, there are two ways of getting out of paying for tail insurance. If you stay with the same insurance company, let’s say we have a cardiologist working for private physician-owned practice. Then, they use whoever the insurance company is, move a job, and that new job uses the same insurance company.

Usually, they’ll roll over the old tail insurance into the new policy. The physician won’t have to pay for tail insurance. When you start a job, there’s no way of knowing if you leave the job and who the new employer will be if they use the same insurance policy. So, that certainly shouldn’t be relied upon. The other way is your new employer paying for your old tail insurance, called nose coverage. This doesn’t happen very often. It can, but most employers do not pay for nose coverage. And if they do, it’s almost always a hospital network. It’s exceedingly rare for a physician for a smaller physician-owned practice to pay nose coverage for any of the physicians they’re bringing in. It just won’t happen. 

What Is the Advantage of a Longer Tail Insurance Coverage?

What makes sense as far as how long it should last? Well, the longer the tail insurance, the safer it is for the physician. So, getting unlimited tail insurance makes sense. Now, as I said before, the cost is a factor. Let’s give a scenario where the physician was sued, and the tail insurance expired. It’s a good claim; they didn’t miss the statute limitations. It hasn’t run yet. Well, the physician could be personally liable, not only for whatever the judgment is but for attorney’s fees and things like that.

It could cripple someone financially if they don’t have a malpractice policy in place if they are sued. It’s not worth it. At least, I don’t think it’s worth rolling the dice. It is smart to get a tail insurance policy. The longer the tail insurance, the safer it is for the physician. Anyway, that’s kind of how long the tail insurance policy will last.