INTRODUCTION TO INTRODUCTION TO MALPRACTICE MALPRACTICE

INSURANCEINSURANCE9555 W. Sam Houston Pkwy Ste. 475Houston, Texas 77099 www.medplusllc.com

info@medplusllc.comt:713 995 1842 f:713 995 0692

“Malpractice Insurance” – The common term used in Healthcare for Professional Liability Insurance.

Professional Liability Insurance – Provides defense, expenses, and indemnity for acts or errors of omission

or negligence specific to the healthcare provider or entity rendering professional services.

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What is Malpractice Insurance?

Indemnity– Monies generally awarded to the plaintiff to settle or close the claim.

Defense Costs– Attorney fees, expert witnesses, court costs.

Expenses– Includes copying of patient records,transportation, living expenses, etc.

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What is Malpractice Insurance?

Who needs Malpractice Insurance?

Licensed Medical Professionals:

PhysiciansLVNs, RNs, NPs

CRNAsPhysician Assistants

PerfusionistsAnyone providing professional

medical care

Licensed Medical Facilities:

HospitalsSurgery CentersMedical Offices

Nursing Homes and Home Healthcare Providers

Imaging CentersLaboratories

Any other facility providing professional services

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Non-Licensed Medical Professionals:

Medical TechniciansAutologous Blood Therapists

Autotranfusionists

Who is providing Malpractice Insurance?

The Employed Professional

-- Covered by the employer -- Site specific coverage -- Covered while on the clock

The Contract Professional

-- May or may not be covered by the employer -- May require proof of insurance for credentialing

The Self Employed Professional

-- May have to provide your own policy-- May require proof of insurance for credentialing

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Why Do I need Malpractice Insurance?

What if there is a bad outcome?

Who will defend you?

Are you protected if you are named in a law suit?

Who will pay for expenses?

Who will pay your indemnity claim?

Why Do I need Malpractice Insurance?

You are a Professional Medical Provider and the decisions you make effect people’s health and their lives

You are part of the Medical Team providing care

You work in the hospital, surgical center, medical office, nursing home, etc.

Insurance may be required for credentialing

Insurance may be required for managed care insurance carrier’s reimbursements

Protect your assets

Protect the assets of your estate and family

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Who files these claims?

• The patient

• The family of the patient

• The children of the patient

• The estate of patient

• Class action suit by a group of patients (pharmaceuticals)

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Why are claims filedA perceived or actual error is made

• Diagnosis

• Medicine

• Surgery

• Negligence

Who in the practice can trigger a suit?• Physician, NP, PA

• RN , LVN

• MA, X-ray Tech, Lab Tech

• Receptionist, Billing Department

It truly makes no difference who is sued within the practice. Question is – Who will be there to respond to the suit?

Hopefully your Malpractice Insurance carrier!

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Occurrence Policy Form

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• The occurrence policy form covers you for any incident or claim that occurs while the policy is in effect, regardless of when a claim is filed or if the policy was cancelled/non renewed.

• Thus, the “tail” is built into the premium.

• The premiums vary significantly because of the difficulty in projecting future claims expense.

• The occurrence policy generally has a higher premium rate than a claims made policy.

• Most carriers do not offer the occurrence policy form.

Malpractice Insurance Policy Forms

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Occurrence Policy Forms

Policy A

Policy B

Policy B – Claims Made

Occurrence to Occurrence

Occurrence to Claims Made

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Policy A

Policy A

Policy A

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Policy A

Policy A

Policy A

Policy A

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• The standard claims made policy is designed to respond only to incidents and claims that occur while the policy is in effect.

• Once the policy expires, it will not respond to any incidents or claims that occurred during the previous policy period.

• In order to insure that incidents and claims that occur during prior years are covered, the policy will refer to a prior acts date.

• The prior acts date establishes how far back the current policy will respond to any prior incidents or claims.

Claims Made Policy Form

Malpractice Insurance Policy Forms

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With a claims made policy, prior acts coverage must always be considered when moving from one carrier to another.

• Prior Acts Insurance Coverage (nose coverage)

• Changing carriers and new carrier picks up the expiring policy’s prior acts

• Not required if extended reporting endorsement purchased

• Extended Reporting Endorsement (tail coverage)

• Purchase at time of policy expiration or cancellation

• Can cost 2 to 3 times current premium

• Consider financial strength of insurance company

Switching Carriers

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Claims Made Policy Form

Policy A with Tail Coverage Policy B

Policy A Policy B will pick up Prior Acts of Policy A

Policy B does not pick up Prior Acts

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Claims Made Policy Form• Claims Made Policy form is generally less expensive at the initial purchase.

• The premium structure for claims made policy is determined by the length of time the policy has been in effect.

• A Mature Claims Made Policy is used to describe the age of the claims made policy, which is usually 4 to 5 years from the retro date. The retro date is the benchmark used in determining the premium to be charged by the carrier.

• Example of premiums of a prior acts inception to a mature claims made policy:

Premium Prior Acts Policy Date

Step 1 First year $2,000 1/1/2009 1/1/2009 Step 2 Second year $4,000 1/1/2009 1/1/2010 Step 3 Third year $6,000 1/1/2009 1/1/2011 Step 4 Forth year $8,000 1/1/2009 1/1/2012 Mature Fifth year $8,000 1/1/2009 1/1/2013 Mature Six year $8,000 1/1/2009 1/1/2014

• The premiums are always subject to rate changes

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Claims Made vs. Occurrence

Claims Made2001 $2,0002002 $4,0002003 $6,0002004 (Mature) $8,0002005 (Mature) $8,0002006 (Mature) $8,0002007 (Mature) $8,0002008 (Mature) $8,0002009 (Mature) $8,000Purchase Tail$16,000Total $76,000

Occurrence2001 $8,0002002 $8,0002003 $8,0002004 $8,0002005 $8,0002006 $8,0002007 $8,0002008 $8,0002009 $8,000Cancel Policy$0 Total $72,000

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In this example we have a comparison of Claims Made (CM) and Occurrence (OCC) policy forms. It shows the costs over 9 years with a cancellation at the end of the 2009 policy period.

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What are limits of liability?

• $200,000/$600,000 - $500,000/$1.5mm - $1mm/$3mm• First number represents coverage for each claim or each incident/occurrence• Second number represents the aggregate or the total amount paid by the policy• Defense and expenses coverage• Board action coverage

What limits should you carry?

• Hospitals, surgery centers, etc. can dictate coverage limits• Managed care contracts can dictate minimum limits • Personal assets must be protected, what is your comfort zone • What does your accountant and your lawyer suggest carrying

What are the effects of tort reform Legislation on limits of liability?

• Cap on non-economic damages (pain and suffering)• No cap on economic damages (medical bills, lost wages, etc.)

Selecting Limits of Liability

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Five Steps to Choosing A Medical Professional Liability

Insurance Carrier1. Don’t buy on price alone

• Low price may translate to inefficient coverage• Look at overall value of product

2. Ask Questions• Offer more than just a policy• Offer exceptional service when claims arise• Coverage features of the policy form, consent to settle, hammer clauses• Good legal panel, their own risk management or claims department

3. Do Research• Opt for a carrier with a proven track record • One that understands and addresses changing liability needs • Does the insurance carrier understand your specialty

4. Check Carrier Ratings • The carrier's financial strength ---A.M. Best rating of A- or better• Will the insurance carrier be around for “long tail” claims

5. Other Sources of Information• Make sure the carrier is highly regarded in the health care industry

Short term and Long term Disability Insurance

Life Insurance - Term, Universal, Whole

Group and Individual Health Insurance

General Liability and Business Property

Workers’ Comp

Business Overhead Expense Insurance

Long Term Care Insurance

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Business Insurance and Other Insurance Products

Life Insurance Funding for Buy-Sell Agreements

Key Man Insurance

Executive Bonuses

Account Receivables Protection

Premium Financing for Life Insurance

Universal Life/Long Term Care Combo

Medicare/Medicaid Audits (RAC)