Does a physician need resident tail insurance after they complete their training?
First, a brief discussion of medical malpractice and the types of insurance physicians utilize is essential. Then I’ll talk about tail insurance a little bit as well.
Types of Medical Malpractice Insurance and Their Difference
There are two main types of insurance used for physicians. You have occurrence-based coverage and claims made. With an occurrence-based policy, you do not need tail insurance. With a claims-made policy, you do.
Let’s talk about the difference between the two.
An occurrence-based policy has to be in effect when the malpractice incident occurs. If you have insurance while working for an employer and the employment relationship ends, the policy ends when the employment relationship terminates. You do not need additional insurance, called tail insurance, after you leave.
People would use occurrence-based coverage because it has no tail insurance cost. However, occurrence-based coverage is generally about a third more expensive than claims made.
Let’s talk about claims made. A claims-made policy has to be in effect when someone makes a claim. The big difference between occurrence and claims made is that the employment relationship could end, and your claims-made policy ends. However, someone can sue you up to two years after they knew or should have known of the malpractice incident.
So, you could be done with the employer but get sued two years later, and the claims-made policy ended. If there is another policy in place, called tail insurance, which covers the gap between when you leave the employer and when the statute of limitations runs, you’re covered. You have nothing to worry about if you’re sued within that period and have coverage.
Physician Tail Insurance Cost
Now, tail insurance can be expensive. As I said, an occurrence-based policy is about one-third more costly than claims made. However, if someone has to pay for tail insurance, it’s usually about twice your annual premium. Your yearly premium is how much it costs to insure you annually.
Let’s take primary care, for example. The average amount for primary care is around $6,000 a year. If you had to pay for tail insurance, it would be about $12,000. It can vary, as low as 150% of your annual premium up to 300%, but most of the time, it’s around twice what your yearly premium is.
If you want a more detailed understanding of the average cost of tail coverage for a physician, feel free to check out this resource. And if you were in family practice and had a $6,000 annual premium, and your tail cost was $12,000, you don’t have to pay that yearly. It’s just a one-time fee that you typically have to secure before the end of your employment relationship.
In your employment contract, who has to pay for tail insurance if you use a claims-made policy? Either the employer or the physician. If the physician has to pay for tail insurance, they’d usually have to secure it before their last day with that employer. After that discussion, we now know what occurrence-based policy is and what a claims-made policy is. Understanding the physician’s roles and responsibilities can give more insight into how these contracts work.
Residents’ Tail Insurance Coverage
And now, let’s talk about residents. Residents always have their insurance covered by the employer.
You will never have to pay for tail insurance if you are a resident. Any program provides the underlying annual premium for any resident. They depend upon what policy it is, either occurrence-based or claims-made. Additionally, some large hospitals or healthcare networks are self-insured. They have a giant pot of money they set aside to pay all claims out of or have their self-insurance program where tail insurance may be unnecessary.
But either way, if you are a resident, you do not need to pay for tail insurance. And the same goes for fellows. You should never have to pay for insurance, either the annual premium or tail, if they have a claims-made policy. When you come out of training in your first job, you may have to pay for tail insurance after either party terminates that contract. And that’s when you need to consider the language in the agreement. Who is responsible for tail insurance? And when does it need to be purchased?
Add Tail Coverage During Residents’ Training
Another question many people ask is, do I need to get additional malpractice coverage during training? The answer to that is no. It’s just not done. You would only get a supplemental malpractice policy for a couple of reasons.
One, it’s just unnecessary.
You have full coverage during training that covers you for any incident that occurs while you’re in training, and it’s just a waste of money to get additional policies.
And two, it makes you a bigger target. Think of it from a plaintiff’s attorney’s perspective. If you’re a plaintiff’s attorney, you are always looking for policy limits, meaning the most that the policy will pay out per incident. Usually, the standard physician malpractice amounts are 1 million per occurrence and 3 million aggregate per year. And so, if you have a $1 million policy limit and it’s a bad case, the attorney will always go for that limit.
Suppose you have the underlying policy the employer provides and another policy with another million-dollar limit. In that case, that is a giant bullseye for any plaintiff’s attorney, and they’re going to say, oh, I have two policies that I can go after and not just one. So, it doesn’t make sense to get additional malpractice coverage simply because it almost makes you a bigger target for any plaintiff’s attorney.
Most people in training have no idea what type of policy they have or any obligations after the fact, simply because that’s usually not something you would need to worry about. However, again, it is essential that when you sign your first employment contract, or independent contractor agreement, for that matter, you have a complete understanding of what type of policy is used by the employer. And then your responsibility after the contract ends as far as paying for tail if you have a claims-made policy.
As an additional resource, I recommend reading up on tail insurance as discussed by the American Bar Association and the American Medical Association’s perspective on professional liability insurance.
So, that’s a little primer on whether you need tail insurance as a resident or a fellow.
The short answer is no, no, you don’t.
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