[Editor’s Note: This is part 3 of a guest post on medical malpractice. This is written by Dr. Sanghamitra Sadhu, with whom I have no financial relationship. In part 1, Dr. Sadhu introduced the topic and discussed how to choose a company and get help in selecting your policy. Yesterday, Dr. Sadhu discussed policy features to look for in your malpractice policy. Today she finishes with those features, including whether it includes coverage for non-clinical activities. She then discusses how to get a discount and especially the effect of tort reform laws on prices.]
Incident Reporting vs Written Demand for Damages
How do you define a claim? Different policies have different definitions of what constitutes a claim. In this regard, there are two basic kinds of policies. The first is an “incident report” trigger- where a doctor can report a negative outcome to the carrier as soon as it happens- without any need to wait for the threat of a lawsuit. And once the MLPI company has been informed of an ‘incident’, it remains the responsibility of the carrier to defend the insured against this event even if the insured doctor changes over to a different company. A tail policy is not required to be purchased for that event to be covered.
The other kind of policy is called a “demand trigger”, where the physician cannot report an adverse event to her carrier unless there is a written demand for money or an attorney letter requesting medical records or a lawsuit has been filed. This puts the insured physician in a very difficult situation with regard to changing insurers. She will no longer be covered for this event by her old carrier since she does not have insurance with them anymore and an MLPI company issuing her a new claims made policy is not going to cover a claim that occurred under a prior insurer. In fact, they may not even cover an event that the doctor should have reasonably foreseen as a potential claim. Any retroactive coverage is only to cover completely unforeseeable claims at that point in time.
There are policies that may be more moderate than these two extremes. They may have an incident trigger for events for a short period of time, such as a couple of months, after they occur and a demand trigger outside of this time frame.
With a demand trigger policy, an insured doctor with a bad outcome that was reported to an insurance company, who thereafter switches to another company before a claim is made, is likely to find that any suit based on this bad outcome is not covered by either the old or new insurance company. It is not covered by the old insurance company because the insured is no longer covered by it and responsibility for this incident was not triggered before the insured switched companies.
There are hybrid versions of these two policy forms: policies that are incident trigger within a short window (30-60 days) after medical services were rendered, and demand trigger after that time; and, policies that are similar to demand trigger policies but are a little more liberal in defining what triggers coverage (e.g. a lawyer’s request for records).
This lawyer website recommends that whenever a physician has a choice (in some markets there may be no choice) between a demand and incident trigger policy, the incident trigger should be taken, no matter what the difference in price. He acknowledges it is a huge generalization but explains succinctly that rationale behind his advice.
This brings us to a difficult question: When is it appropriate to report a bad patient outcome to your MPLI company? As noted by the MedMal Insurance Blog, “The question is fraught with legal and practical issues: legal because there is a contractual duty to report matters that can lead to claims; and practical, because reporting bad outcomes can affect one’s insurability and qualification for claims free discounts.”
This is a grey zone because most insurers do want to know if a claim can be “reasonably expected”, but there is no definition of what constitutes “reasonable”. Also, the insured has a responsibility to cooperate in every way with her insurer so that they may defend her most effectively and it may be construed that any delay in reporting a significantly bad outcome to the insurer may hamper their ability to prepare for her defense.
On the other hand, treading with extreme caution and reporting every negative outcome you have may put you in the “high risk” category and seriously jeopardize your insurability since every new application for MLPI asks for a list of all incidents you have previously reported to your carrier.
Some general considerations:
-If an adverse event is routine or expected for a procedure or medical treatment, it need not be reported, unless more severe than usual or do not recover as expected.
-All requests for medical records do not need to be reported either, unless they explicitly state that the request is being made in light of negligence by the provider
In this matter, asking for advice from your insurance agent/broker does not help because they can also be sued for negligence in case an incident does turn into a future claim and they recommended you do not report it. So, they will generally always recommend that you report the incident. If you think you need professional advice regarding a particular scenario, you should contact an attorney.
Review policy exclusions carefully. Go through the list of procedures you will be performing and ensure that they are all included. Generally, procedures commonly performed by a specialty are not a problem but if you will be performing something that is not routinely performed by your specialty, make sure to keep your MPLI company informed.
Medical Director Coverage
Medical directorship of outpatient surgical centers, nursing homes, dialysis units have both patient-care related as well as administrative/non-patient-care related responsibilities. This exposes the medical director to potential litigation from their patients, employees or employers. Doctors are responsible for keeping their MLPI companies informed about any Medical Directorship positions they hold and always keep written records stating whether they are covered both for patient-related as well as non-patient-related activities that come with the territory. Usually, one’s standard MLPI policy does the cover the related patient-related activities but excludes the administrative responsibilities of Med Director. You may be able to negotiate extending coverage to such activities, hopefully without an increase in premium, but if not, at least with additional premium. Larger groups obviously have more bargaining power in this regard.
The MedMal Insurance Blog notes that “It is best to have the medical director exposure covered within one’s own medical malpractice policy because this reduces the likelihood of gaps in coverage that can occur when more than one policy provides coverage. If coverage cannot be secured through one’s own malpractice insurance policy, one should seek out the coverage either through a policy provided by the entity for which he or she is Medical Director or through a personal “Directors and Officers” policy.”
Cyber Liability Coverage
Healthcare providers and facilities are now routinely exposed to a wide array of potential sources of litigation due to EMR, electronic patient communication and increasing regulation by local and regional licensing and other authorities. In response to these new demands, MLPI carriers have begun to offer, usually at no additional charge, a package of cyber and regulatory coverages. It protects the insured from liability that comes from loss or wrongful transmission of electronic data, whether accidentally or as targets of cybercriminals and the costs associated with data recovery that follows. Unfortunately, most of the time, this included coverage proves insufficient if there is a real problem.
Hence, most insurers have the option of additional cyber/regulatory liability coverage with added premium. These often have some modest copay or deductible, after which limits are generally around $0.5M/$1M for cyber and regulatory coverages and $100k for license protection, which are generally sufficient. These limits will usually cost you between $1500- $3000 per provider, with per capita costs obviously demising as the size of the group increases. Here is a more in-depth discussion on the different kinds of cyber, regulatory, and licensing liabilities.
New To Practice
There is generally a new to practice discount for claims made policies because you have yet to accumulate a history of adverse events. These policies may start out at 25% of the mature premium rate for year 1, 50% for yr 2, and 75% for yr 3 until they mature at 4-5 yrs. When comparing policies by price, pay attention to the overall cost over this entire duration, rather than just the first year’s premium. Some companies may have a lower first year premium, but may be more expensive overall. Occurrence policies generally start with the mature rate and do not have a sliding discount in the first few years. As with most insurance, you get more bang for your buck with higher coverage amounts. For example, for $1M/$3M coverage, my 1st yr premium is $2766- so, $1 of coverage costs me 0.2 cents. For $250,000/$750,000, my 1st yr premium is $1958- or cost per dollar of coverage is 0.7 cents.
You can also often get a part-time discount of around 50% if you work less than 20 hours a week. New to practice and part-time discounts cannot be combined.
Claims Free Discount
Just as StateFarm has accident forgiveness, there are claims free discounts for going 5/10/20 years without a claim. The size of the discount goes up as the claims free years add up, often as a percentage match: a 5% discount for a 5 yr claims-free period, 10% discount for 10 years and so on. How the insurance company defines a claim for this purpose varies with the insurer- the spectrum extending from receiving a mail summons to having to pay out indemnity.
Risk Management Discount
Some companies offer offer discounts of ~ 5% for participation in risk management seminars or webinars.
You can often get a discount for being board certified and increase your discount if you are a double/multi-boarded specialist.
Check with your broker or your professional Association for discounts associated with membership.
Large Group Discount
As with health insurance companies, large practices can often negotiate better terms with their MLPI carriers.
You may opt for a deductible that reduces the premium by a certain percentage. They are not common in MPLI policies in the standard market but are more common in the surplus lines market. The discount in premium is usually too low to be of significant value- but this is an area you may want to examine in your own situation since the ability/willingness to self-insure is very variable. Also, large groups may be able to negotiate a significant discount in their group policy with a sizable deductible.
Tort Law and Reforms
There is wide state to state variation not only in medical malpractice laws but also in culture. This excellent article in EPMonthly.com surmises that “state culture trumps state laws because the relation between tort reform, malpractice costs, and medical liability environment favorability are complex and nonlinear. Sometimes, the legal culture in a state can overwhelm tort reform laws favoring physicians or can protect physicians despite the absence of meaningful laws.
Compare the hellhole known as South Florida with “nice” Minnesota to get a sense of the extremes. The best liability environment for a physician is one in which litigation and malpractice costs are both kept to a reasonable minimum. In an ideal environment, frivolous suits are minimal and meritorious cases are quickly identified.”
The states that have seen the greatest changes in recent times are Texas, Ohio, Pennsylvania, Mississippi, and North Carolina.
The reforms that have been known to have greatest impact are:
- a hard cap on non-economic damages without allowing too many exceptions or being too high to be meaningful
- a case certification mandate, which requires the plaintiff to attach a signed statement from a qualified expert
- a pre-litigation panel review process
Also, as part of the Affordable Care Act, there is now federal funding for tort reform alternatives. $50 million in grant money has been given to states for demonstration of viable options, some of which may include:
- Health Courts
- Early Offers
- Apology Programs
- Medical Review Panels
- No-fault system (patient compensation funds)
What do you think? What discounts did you get on your malpractice insurance? What do you think about tort reform? What would you like to see? Comment below!