How to Avoid the High Cost of Tail?

Medical Clinics can purchase Medical Malpractice Policies that can provide (or offset) the cost of tail.

Often clinics (Urgent Care Centers, Internal Medicine/Primary Care Groups)  and medical groups specializing in pain management struggle with the challenge of  on-boarding physician while  promising to responsibly provide their Medical Malpractice Insurance …which is common and mandatory in order to recruit internal medicine physicians and pain management specialist physicians …but how do you afford to manage the seemingly inevitable cost of future cost of claims. 

The future cost of claims is referred to as tail insurance (which is defined as :  Tail Coverage (Extended Reporting Coverage) 
Coverage that protects the physician against all claims that arise from professional services performed while the claims-made policy was in effect, but which were reported after the termination of the policy. Some insurers offer this feature free of charge for retiring doctors who meet certain requirements.
 

Tail coverage can’t be discussed enough: Physicians rarely find a policy that INCLUDES their future cost of medical malpractice claims…hence, the need to ask the ‘tail’ question at the start of the medical service, this is putting the cart before the horse; but the reality is: you can find a carefully structured policy that can include tail.

The tail cost is never completely eliminated (but you can reduce the cost significantly by having the ongoing premium amortize the tail over the years.

Tail does not go away, but costs  can be intelligently managed over time:

There is simply no free lunch..but  there are smart policies –  There are physician medical professional liability insurance policies that can be structured to include the cost amortized over time so that canceling a doctor does not trigger tail.

 There are departed physician rosters, slots, auxiliary headers, shared limit solutions that can be added to a policy so that when you recruit internal medicine doctors, pain management physicians and surgeons you don't have to budget tens of thousands of dollars to pay the tail and you can promise with assurance that the cost for the coverage that you are providing them will include protecting them against future claims after they have discontinued their medical service with your organization 

 Are there any Occurrence Plans anymore? The occurrence plans that neatly include tail (why would anyone purchase a claims made policy anyways?)

What happened to the by-occurrence approach to malpractice…where claims are covered regardless so long as doc was under the policy when the alleged malpractice occurred? 

Occurrence policies are very rare  (especially for  small/midsize medical groups (of fewer than 50 providers)Because you are paying for the future cost of claims in the present year , the premium is loaded (whereas claims made premium is ‘real time’  deferring the cost of each physician’s future claims expense to the tail premium (which is only generated at time of cancelation and then only by each physician.)

 But wait…if a group pays premium for a period of time. Cannot that amount be sufficient to cover tail?

I cannot imagine there is not a way to cover all the risk associated with a doc during their covered period…without having to purchase tail…

Why isn’t the present premium enough??

“The premium has been paid, the company should cover the claim regardless of when it is presented ..right??”

Everything about malpractice is to protect against the potential risk “down the road.”  So why isn’t that premium enough…(many groups complain)

Well, this is the challenge in the medical malpractice world (and other ‘long tail’ insurance niches):  it is difficult to accurately measure and expensive to provide insurance coverage for claims that might be presented years down the road.  

Three common methods of avoiding tail for mid size groups:

1.      A schedule of departed physicians (not to be confused with ‘dearly departed’ physicians).

The roster, also known as a schedule, keeps track of the doctors who have provided service and canceled.  A group a premium is developed that is sufficient to pay for the ongoing cost of covering claims for that roster of physicians and builds premium into or added to the present annual cost of insuring the group (just like with the per diem solution which we will discuss and the slot position) there is an element of kicking the can down the road,  however, with the departed physician roster we are beginning to pay that cost on an annual basis which reduces ultimately the cost of tail when the policy is terminated. 

These solutions provide that occurrence element that you’re looking for……between the per diem header and the slotted concept, we can provide flexible coverage for your group while reducing the expensive tail bills generated at each physician’s cancellation.

After an initial ‘observation / trial period’, you switch them into their own certificate (policy).

 2.      Per diem builds a roster of ‘hourly rated physicians sharing limits with the entity (subject to a higher  per year aggregate total)

3.      And Slot provides separate limits for each doctor per specialty (think of this as a policy that allows for  one at a time coverage)..allowing you to cancel and replace without triggering tail.

You can open many slots as some other policies have done. 

The SLOT concept: provides separate insurance limits for each physician (rated by specialty: [ i.e. one slot for PMR, one for INT, one for ORT, Anesthesia Pain, etc.]  and when one physician cancels, you just bring in another (of like specialty into the slot);

This approach allows you to Provide insurance for the doctors you recruit , allows you time to make the decision to keep them on your policy (or cancel and replace)  without triggering tail.

 Slot or Per Diem eventually there is a tail charge to close out the ‘slot/per diem’ header.

But in the interim, you’ve saved on that separate per doctor tail charge and  when onboarding/recruiting physicians, you can  assure them that you can provide medical malpractice insurance including tail if they should cancel. 

The per diem solution shares a per claim limit with the entityCan’t overstate the importance of considering the cost of tail as you plan to start your work with any group --as an order employee or Ind. contractor

Understanding the options and the expense and the importance of providing liability protection weeks months and years from the day you cancel is an important form  of risk management.

 

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