Claims-Made Policies for Medical Spas

October 14, 2019

A medical spa office starts in a similar way to a hair salon: a talented nurse, doctor or esthetician rents a chair or leases a small space, and begins to create their vision for enhancements using FDA-approved and common off-label injectables, laser and chemical peels, and other natural holistic wellness strategies to improve lives and make real change through aesthetic enhancements.

Some states require a physician collaboration agreement in order to purchase and use injectables. The liability policy that protects the esthetician and the spa should also cover the business, whether it’s incorporated or a limited liability.

A corporation policy should also cover silent investors, active partners, doctors, mid-level providers, and aestheticians. As the spa grows, the general property liability policy and professional liability policy should be able to expand and scale with that growth, without adding a substantial premium increase.

The Doctors Insurance Agency provides expert experienced and focused in Medical Spa Professional Liability protection.

The policy should cover the FDA-approved uses and common off label uses for injectables. The application that you complete is your best guarantee that the policy will cover all services.

These policies are written on excess & surplus lines forms. This is a specific insurance term to describe flexibility in drawing the contract and extending endorsements so that all procedures are covered. With this kind of policy, it should not be a problem to grow and add new procedures to a medical spa practice.

One of the most common mistakes we see is owners of spas advised by counsel to not cover the talent they recruit. The argument is that leaving them to purchase their own liability insurance creates a better firewall and protection. This is simply not true. As the owner of the spa, you are vicariously connected to all parties working on behalf of the organization, and as such, the policy should cover everyone seamlessly. It might be smart for spa workers to carry their own affordable policy, but it is arguably redundant.
It is a natural progression to include medical doctors as the use of wellness practices and functional medicine expands.

Nutrition counselors, functional doctors expert in reviewing and analyzing the environment, lifestyle, sleep habits, and exercise blend naturally with aesthetic practices, creating integrative spas and centers that can also be seamlessly insured, with one policy comprehensively covering all services.

Adding a medical doctor expert in wellness and functional medicine is as easy as adding a part-time esthetician. It is important to document the date they start, all procedures they provide at the practice, and of course the medical malpractice underwriting piece, which consists of the application copy of the curriculum vitae as well as a claims history report.

Claims history reports for nurse practitioners and doctors are important for the common language of underwriting. They are like requiring a credit history report when applying for a loan. It is also important to understand these policies renew every 12 months. As the owner, you will go through the exercise of completing another application. This is a common complaint, but understand that every year the application becomes part of the legal contract. It is not guaranteed that we will renew the policy with the same carrier, so a new contract (a new application) allows us to go to the market to leverage the changes in rates and the fluctuations in the marketplace.

This often results in a renewal at or just slightly above the expiring premium. Just as with Medical Malpractice Insurance policies that increase every year, these are written on claims-made forms which are built on the logic that the longer you have been insured the greater your universe of patients, customers and clients. This means there's an actuarially-calculated greater likelihood of being sued.

Just as a life insurance policy is more expensive as you get older, so too is a claims-made policy. They are more expensive in the second, third and fourth years. This is something to anticipate and follows logically as you grow your business. However, unlike an individual clinical physicians liability policy, these are written with a macro underwriting review. Policies ensure the entity, the medical director, any medical professionals providing aesthetic services, and, as you grow, any massage, nutrition, wellness and functional medicine professionals you add will be covered. The policies scale affordably and correspond with revenue and the number and type of procedures.

The Doctors Insurance Agency will work with the renewal application to appeal to companies for a reasonable increase reflecting the natural expansion of patients. When the policy reaches the third year we will do our best to apply claims-free credits and discounts so that you can look forward to a predictable and reliable annual premium.