Next in our steps to start a solo practice is deciding on your malpractice insurance. Here are my thoughts:
How much do I need?
Most hospitals require $1 million per claim/ $3 million aggregate per year for staff privileges.
According to a recent brochure from OMIC (Ophthalmic Mutual insurance Company), 82% of their claims were closed without payment (vs 76% for industry, although this is not clear if ophthalmology only or all specialties included).
The average claim settles for $200,000 (OMIC) and $273,000 (industry), so unless you are doing refractive surgery on patients with ectasia or running a ROP clinic with poor documentation, it is extremely unlikely that claims will exceed your malpractice limits.
To put it in perspective, you’d need to settle six claims for twice the average limit to exceed your aggregate yearly limit. Most ophthalmologists will encounter one, two, or perhaps three claims over a career. If you settle six claims in a year, you have much bigger problems than not having high enough limits for your malpractice insurance.
What is the difference between claims made and occurrence?
For occurrence, insurance covers any claims for treatment rendered during time period the insured was covered by the insurance. For claims made, it covers claims actually made and treatment was rendered during the time period the insured was covered by the insurance. Since claims typically aren’t made immediately, there are instances where you stop practicing with a group- and six months later a claim is made. It wouldn’t be covered unless you bought something called tail insurance, which covers claims after the policy expired, but treatment rendered while the policy was in force. This article link explains it well.
What is the statute of limitations?
The statute of limitations is the time period a plaintiff has to file a claim after the patient realized or discovered that negligence occurred. It varies from state to state but is generally two years for most states. Here’s a link that tells you how long it is for your state.
How much does it cost for malpractice insurance?
For claims made insurance, the first two years are typically less expensive. In Arizona mine was about $4600 in year one, $6500 in year two, and $7500-8800 onwards.
Most companies quote a base premium and then have an annual dividend and risk management course discount. My base premium was $13,000, and there was a risk management course discount, a loss free credit, and a dividend of 20%. OMIC also gives discounts for part time and my understanding is that if you stop practicing for over 60 days (maternity leave or illness) they can temporarily put your policy on hold.
Here is a chart for other specialties from a major carrier in my area (this is before any discounts, so the out the door price will be lower).
Note that ophthalmology is one of the lower costing specialties, in the same category with family practice, internal medicine, pediatrics and pathology. If you do “special procedures” you are moved up into category 6 for ophthalmology. The highest were neurosurgery, OB, general surgery, CT surgery, and perinatology.
For optometrists my understanding the rate is typically between $500-800 per year, when independently purchased. OMIC lets you add optometrists employed by your practice for 3.5% of your premium for shared limits and 6.5% of your premium for separate limits.
Why does the cost vary from state to state?
Because the climate of different jurisdictions might be more or less friendly to Plaintiff’s attorneys, and judges and juries might be more sympathetic to Plaintiffs, while in other areas doctors hold great respect and can do (almost) no wrong. Some states have tort reform or caps on pain and suffering which drives down premiums.
How much does it cost for the tail?
When employees sign a first junior associate contract, one negotiation in the contract is who pays the tail for a claims made policy. There is no tail for a occurrence policy, the price of the tail is “baked”into the higher premiums. If you are signing a contract, ask who the insurance carrier is, and find out if the insurance is portable if anything happens (if you switch jobs, you can continue to pay the premiums and keep the policy in force).
The tail typically costs between 2 to 2.3 multiples of a year’s premium without discounts. In Arizona, this is about $13,000, meaning that if you leave your job and are responsible for the tail, you could have to pay about $25,000 out of your own pocket. I personally know a general surgeon who left a job and had to pay $80,000 out of their own pocket for the tail. Ouch.
Most insurance companies will forgive your tail upon retirement if you’ve been a policy holder for a certain number of years (say five years), but this is usually a once in a lifetime rule.
What is entity malpractice insurance and how does it differ from individual?
Entity malpractice insurance covers your company and its vicarious liability for your employees. For example if your policies and procedures manual indicates that patients with new onset flashes and floaters need to be seen immediately, and a patient phones in with not only these symptoms but also a curtain coming down. Your staff books the patient for two weeks, and the patient loses vision due to unsuccessful retinal detachment surgery and names both you and the practice in the suit. You never spoke with or met the patient, and eventually your name is dropped from the suit and your company settles.
One advantage of settling under your company rather than as an individual is the claim then is not reportable to the NPDB (National Providers Data Bank).
Should I pay extra for higher limits for my entity?
As stated above the average a claim settles for is $250,000. Entity claims are usually included in your limits of $1 million per claim/ $3 million aggregate. Entity claim losses probably settle for less. Unless you have multiple claims in a year, it is extraordinary unlikely that they will exceed the $1mil/$3 mil limit. So unless you have very reckless employees that you don’t supervise well, it is very unusual for you to need to purchase additional coverage for your entity.
What else does my insurance company provide for me?
OMIC has a terrific website that is full of useful information. . Even if you aren’t covered by them (say if you work in a group that uses another carrier) I would encourage everyone to look at their website. If you’re between jobs and have extra time try to read their entire website. It’s worth the effort.
They have many ophthalmology procedure specific consent forms (also in Spanish), articles about risk management, online courses and recordings, and a risk management hotline. I along with many others from our google group have phoned the risk management hotline to get advice on how to deal with difficult situations or how to discharge a difficult patient from my practice.
OMIC includes $100,000 aggregate annually for regulatory protection (billing errors, HIPPA, EMTALA or stark complaints) and data breach with cyber protection.
What gotchas should I look for?
Make sure your malpractice policy doesn’t have a “hammer” clause which allows the company to settle a case against your consent. Often times it is less expensive for them to settle it rather than to litigate on principle even if you as the defendant are right, and it’s a frivolous case. The problem with this is that it is reportable to the National Practicioners Data Bank. While this isn’t a death sentence on your career, most physicians agree that it doesn’t look good on them if this happens.
Also make sure that if your policy is $500,000 or 1 million per claim, that the costs of litigation are separate from monies for settlements or judgments.
All malpractice companies should cover state medical board complaints. Find out if there is a limit on the amount paid.
Make sure your company has a high rating under AM Best. You might want to save a few bucks, but this may not be the best place to do it. You don’t want your company to go belly up when you need them the most.
If there are any special procedures you do make sure they are covered. For example if you perform refractive lensectomies or refractive surgery make sure it’s covered. Same if you are a oculoplastics surgeon who performs other facial or even abdominal procedures.
Where should I find what carrier to use for my insurance?
Ask your specialty society or county or state medical society. Ask colleagues in your field. OMIC is sponsored by the American Academy of Ophthalmology. Since it’s ophthalmology specific the risk managers and decision makers speak the same language as me- if there’s a claim involving glaucoma, I won’t have to spend hours educating them on what glaucoma is.
In Arizona there’s a company called MICA that’s affiliated with our county medical society that has an excellent reputation. Or you could choose to use a broker.
Disclaimer: this article was written independently by Howie who has no relationship with OMIC other than the fact he is insured by them; OMIC is not affiliated with nor has endorsed this blog.