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For Physicians – Understanding Malpractice Insurance

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Medical Malpractice is a hot political topic, as states debate reforming medical malpractice litigation, cap jury awards, and grapple with the exodus of physicians from states where the malpractice premiums have skyrocketed. To the new physician beginning practice, obtaining malpractice is one of the many applications you will complete before scheduling your first patient. Many states do not require residents to have malpractice coverage during training, so obtaining coverage for your first practice will be your first experience with Malpractice policies.

What do you need to know? For one, you can’t go without! Not only is going without malpractice insurance an extremely risky concept in a perfect world where no one ever makes an error and society is not litigious, most health insurance companies will not enroll you as a provider unless you produce proof of coverage.

What kinds of Malpractice policies are there?

There are two different kinds of malpractice insurance: Claims-made and Occurrence. It is easy to get them confused:

Claims-Made insurance indemnifies you from malpractice “claims made” by patients only when that policy is active. If you leave a job that has claims-made insurance, you will have to purchase “Tail” coverage. The tail coverage will protect you in case a claim is made after the policy lapses for an incident that occurred when you were covered.

Occurrence-Based insurance provides coverage for any incident that occurs when the policy is active, regardless of when a claim is made. In other words, you do not need to purchase Tail coverage. Occurrence is generally considered the “better” insurance, as it provides more security and less hassle. It is, of course, more expensive.

Who is paying for your malpractice insurance?

Unless you are going into solo practice, your new employer should be paying for your coverage. Hospital-employed physicians’ premiums are typically paid by the hospital. If you are joining an independent group, the group will often pay your premiums during your employed period (the “partnership track”) and then once you have become a full equity partner the premiums are paid for in the same manner as the rest of the group. In some cases, each physician covers his or her own premiums from their own revenue, but in most cases, malpractice is considered overhead of the group.

If you are already practicing and have claims-made coverage, one negotiating point would be the purchase of tail coverage, which can be tens of 1000s of dollars. It might be in your new partners’ best interest to provide tail coverage for you as you join their practice.

Where do you buy malpractice insurance?

Malpractice insurance is purchased from private insurance companies. In New York, the largest underwriter of liability insurance is the Medical Liability Mutual Insurance Company (MLMIC).

Are there discounts available?

Yes! Your carrier will offer online or onsite courses designed to help you minimize risk and exposure. Completing these courses will reduce your premiums, so your employer should offer to pay you for your time spent taking the course.

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