Surprisingly, most states do not require physicians to have malpractice insurance, and only the following states require malpractice insurance: Colorado, Connecticut, Kansas, Massachusetts, New Jersey, Rhode Island, and Wisconsin. With that said, most hospitals have staff bylaws that require physicians to have malpractice insurance. Hence, most physicians that plan to contract directly for locums, per diem, part-time, or full-time roles should know how they will obtain malpractice insurance.
This article reviews the six basic concepts each physician looking to contract directly must understand about malpractice insurance before negotiating with a healthcare facility. Please know that this article is only meant to introduce the topic of malpractice insurance when contracting directly. ***This article does not review the intricacies of malpractice policies and the items to worry about within the malpractice policy documents.
Malpractice coverage minimums
Each state requiring malpractice insurance has a minimum coverage limit, ranging from $100,000 to $1 million. In most cases, the hospital requirements take precedence over the State requirements as long as the hospital’s minimum is greater than what the State requires. The insurance minimums can be reviewed in your contract with the facility or the facility’s bylaws. If the State has a patient compensation fund, this will also dictate if there is a minimum requirement for coverage to participate in the fund. In general, hospitals will require minimum insurance coverage that is as much or more than what the State and patient compensation fund requires.
Advice: Make sure your malpractice policy provides enough coverage so that you at least meet the minimums required by the State, patient compensation fund, and hospital.
Patient compensation funds
Several states have caps for medical malpractice compensation. You can call this Tort Reform, including caps for non-economic and economic damages. Please recognize that patient compensation funds may require you to pay into or invest in these funds to participate. Since each state is different, it is worth discussing with a malpractice carrier or legal professional to ensure you are covered appropriately.
Advice: It can be great to work in states with patient compensation but ensure that you have taken the appropriate steps to participate in the fund.
Claims-made vs. Occurrence-based
Claims-made policies are cheap and are easier to find than occurrence-based policies. One of the more critical things to understand is that an individual claims-made policy only covers you when the policy is active. In other words, the claims-made policy is only protective if the malpractice suit is made while the policy is still active. If a claims-made policy is canceled, and a claim is made against you, you will be financially exposed if the statute of limitations has not expired. On the other hand, a physician that agrees to be placed on a “group” policy may not require tail insurance as long as the group policy remains active beyond the statute of limitations. In comparison, occurrence-based policies usually do not require tail insurance as it does not matter when a claim is made against it, with or without an active policy.
Advice: Consider getting an occurrence-based policy or be included on a group policy if you want to avoid the need for tail insurance. If you choose to have an individual claims-made policy, know how you will be covered from a malpractice suit if you cancel your policy. ***Group policies do have some disadvantages, and those are discussed elsewhere.
If you have an individual claims-made policy, consider how you will be protected if you are thinking about canceling your policy. Not all tail insurance is created equally. Typically, tail insurance can cover you for two, five, or an infinite number of years after you cancel your policy. Unlike a group policy, if you cancel your own individual claims-made policy, you will need to consider the following: extending your policy, purchasing tail insurance, or finding “nose” coverage.
Advice: Consider how you will be protected if you leave a facility and have an individual claims-made policy. If you purchase tail insurance, ensure that the tail length aligns with the statute of limitations. Those with an occurrence-based policy usually do not have to worry about tail insurance.
How to get a malpractice policy?
Physicians have three options for obtaining malpractice insurance when contracting directly.
- Use your existing policy. If you already have a malpractice policy, check to see if they will cover you for additional work.
- Get a new policy. Find a broker or agent to work with you to select the best malpractice policy for your situation. When looking for a policy, avoid using the word locums and telling them you only want “short-term” coverage. Instead, use the words “contracted physician” and say you are looking for long-term coverage.
- Have the facility include you on their malpractice policy, and many facilities can slot you into their group malpractice policy. Don’t forget that if you work with a private practice physician, their malpractice policy likely covers part-time coverage (i.e., locums).
Advice: When negotiating with a facility to contract directly, know that there are multiple ways to obtain malpractice insurance depending on what works for all parties.
How to pay for a malpractice policy?
It is simple, you either pay for the policy, or the facility does. Ask them to pay or reimburse the policy’s premium if you are asked to have an individual malpractice policy. They can pay or reimburse for the entire annual premium at once or pay it on a monthly basis. If the facility refuses to pay or reimburse for the policy, one option is to ask them to provide a monthly stipend. You can also ask them to pay a percentage of the premium. If all else fails, ask for greater compensation and consider paying the premium as a business expense. Don’t forget to negotiate for the facility to assist with tail insurance and patient compensation if applicable.
Advice: If you are required to have an individual malpractice policy, do what you can to negotiate for the facility to pay or reimburse for the policy’s premium.
This article is introductory in nature but highlights essential elements you must understand if you successfully negotiate directly with healthcare facilities for part-time or full-time roles. It behooves all physicians to know the different types of malpractice policies and what items must be discussed during negotiations. Best of luck negotiating directly with facilities, and be sure to ask us if you have any questions.