What are some issues surrounding medical malpractice insurance for fellows?
First, when you are in training as a resident or fellow, whatever program you’re with will provide medical malpractice insurance. Then, depending upon what type of policy it is, they’ll also cover your tail insurance.
Do you need additional medical malpractice insurance during training?
No, you do not. I don’t know of any physicians with supplemental medical malpractice insurance. Anytime you’re working for an employer as an employee is different than if you’re an independent contractor.
Different Types of Medical Malpractice Insurance Coverage for Fellows
But if you’re working for an employer as an employee, they will pay for your underlying premium, which means how much it costs to insure you annually. And depending upon what type of policy it is, the language in the contract will dictate if tail insurance is necessary.
Let’s go through the different types of medical malpractice insurance and what a fellow should think about.
Self-Insured
First, many large organizations, hospitals, and hospital networks are self-insured. It’s slightly different than if you are in private practice or working for a corporate-owned physician group. If they’re self-insured, in the simplest way, they set aside a large pot of money, and they pay all the claims out of that. In that scenario, the physician wouldn’t need to worry about anything. There is no underlying premium, and they wouldn’t have to worry about paying for tail insurance.
Claims-Made Policy
The second type of insurance is claims made.
Claims made medical malpractice insurance means a policy has to be in effect when someone makes a claim. So, you could work for an employer. Let’s say you work for them for four years, then leave. That claims-made policy only has effect during the term of employment. So, you could leave an employer, and that policy is over. However, there still is time for someone to sue you. The statute of limitations in most states is around two years.
There are some exceptions for minors when they become adults, but I’m not going to get into that. So, let’s take two years as an example. If you have a claims-made policy and leave an employer, there will be a gap where there’s no coverage unless you get tail insurance.
Tail Insurance
Tail insurance covers the gap between when you leave an employer and the last day somebody can sue you. You can purchase different lengths of tail insurance. It could be indefinite, meaning it lasts forever.
It could be five years, or it could be three years. And the contract will usually dictate how long the tail policy needs to be. And as I said before, the employment contract will also dictate who’s responsible for paying for tail insurance. So, the language will state if it is a claims-made policy, and if the contract terminates, either the physician or the employer will have to purchase tail insurance.
It’s probably 50-50 if you work for a private physician-owned practice. It depends, but it’s different from a slam dunk where the employer will pay for your tail insurance every time. That’s not true. The cost of tail insurance certainly is a consideration. And tail insurance generally is about twice your annual premium. The yearly premium is how much it costs to insure you annually. And you multiply whatever that number is by two, and that’s how much you have to pay for tail insurance. It’s a one-time cost.
It’s not like you have to pay for this yearly, but it can be costly for some specialties. Depending on your claims history and length with the employer, the cost could be as low as 150% up to 300%. But as a rule of thumb, two times the annual premium is pretty standard. And let’s take an OB-GYN, for example, which is the most expensive.
An annual premium for an OB-GYN could be 50 to $80,000. And so, their tail insurance costs could be somewhere between one hundred to 160,000, which is a large amount of money. Whereas if you’re in primary care, your annual premium is around $6,000. So, your tail cost would be $12,000.
Who Pays for the Tail?
Can you negotiate who pays for the tail upon the termination of the employment contract? Indeed, you can. And for some specialties, as I mentioned, it could be a huge determining factor whether you take a job or not.
If you’re coming out of training and you’re an OB-GYN who is moving to a new employer, and you have to pay for tail, that could be a problem.
Let’s say you start a job, you’re there for a few years, it’s just not working out for whatever reason, and you move on. You’re stuck with this enormous tail insurance cost, which sometimes would make people stay with the job they hate because they can’t afford to pay that amount. So, negotiating who pays for the tail up front certainly is critical.
There are some ways of getting out of paying for tail, and I’ll go over this briefly.
The new employer could pay for your old tail if you have a new employer lined up. That’s called nose insurance. That’s one way of getting out of paying for it. If you stay with the same insurance provider, they can roll over your policy into a new one. Usually, you won’t have to pay tail insurance. If you were with a private practice in the state and they used one insurance carrier, and you stayed in the same condition, they used the same insurance carrier and rolled your policy over. Most likely, you wouldn’t have to pay any tail.
The other way is to negotiate it in advance. So, that’s claims-made insurance with a tail. Now, if you’re a fellow in training, you should never have to pay for your underlying premium or tail insurance. It’s just unheard of. So, one, you don’t need additional medical malpractice insurance. And two, you shouldn’t have to pay either for the premium or the tail if it’s there.
Occurrence-based Coverage
The last type of insurance is occurrence-based coverage. Occurrence-based coverage means a policy has to be in effect when the event occurs.
No tail insurance is necessary for occurrence-based coverage. Now, if you’re an employee, you don’t dictate what type of insurance you will use. If your employer uses occurrence-based coverage or even claims-made coverage, it’s not like you’re going to be able to tell them, no, I want you to have this coverage for me.
The main difference between occurrence-based coverage and claims made is that occurrence-based coverage costs more. It costs more because you don’t have to pay anything for tail insurance. And a good rule of thumb for this is that occurrence-based coverage is about a third more expensive than claims made. So, if you had a $6,000 annual premium for a claims-made policy, it would be $2,000 more per year if you had an occurrence-based policy.
If it’s up to you, absolutely go for the occurrence-based policy, especially if you’re going to be there for a short term. Just do the math on that. So, let’s say you have a $6,000 annual premium, and tail insurance is twice the amount. And let’s say you leave after two years and must pay for the tail. You would have to pay 12,000. Whereas if you had an occurrence-based policy, you would have to pay 8,000 and then 8,000. So, only 4,000 more. And 4,000 certainly is less than 12,000.
That’s why an occurrence-based policy would make the most sense if you’re going to be with an employer for a short term and if it’s up to you.
So, that’s a little primer on medical malpractice insurance for fellows. It is essential to read the language in the employment contract very carefully and see how much the limits are, who the insurance provider is, what type of policy it is, and who pays for tail insurance if it is a claims-made policy.
