Tail coverage???

[Gtstricky]

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My wife and I are trying to weigh the option of her switching practices. She has found a great practice with people she would really enjoy working with. It pays about the same but offers a nicer bonus plan. We are all set to have her accept the offer and ran into the issue of tail insurance. Her current insurer just informed us that the cost will be $28,000. Her current employment contract excludes tail coverage and the new employer is not willing to help with it. The insurance company has stated that you have 30 days to pay the bill upon termination if you want the coverage and offer no payment options, just lump sum. She has been out of residency for 8 years and never had any issues. The statute of limitations in her state is 2 years so essentially you are buying 2 years of coverage. We are tempted to gamble and just do without the coverage. As much as she wants the job we are not willing to take that hit.

We did check with her new employer and they do not offer nose coverage (prior acts coverage).

It really seems the system is set up to prevent small practice docs from switching offices. Large hospital groups are able to help ofset that cost but if you like the small group model you are stuck.

What would you do?

 

[lowbudget]

*sigh* That's unfortunate and for all the students and residents who read SDN, this very case should be a lesson in itself. It's unfortunate that it's only now that you are realizing that you don't have a tail. That's something that should always be in the forefront of your mind because tails, non-competes (enforceable or not), and equity in partnership are the barriers to a successful exit strategy. You should always be able to visualize your exit before you join. Who pays the tail? That needs to be established up front and in writing and if your employer renews contracts, that should be the big bullet point that you look at because it's a big ticket item you would have to pay in order to leave.

Tails get more expensive the longer you are in practice (because you've seen that many more patients who can sue you). I disagree that you only need to buy 2 years of coverage. Most statutes of limitations are 2 years from discovery; and if you see kids, in some/most states, the child has to become an adult before it terminates. (http://www.modernmedicine.com/modernmedicine/article/articleDetail.jsp?id=731286)

Your options are:
1. To save and pay up your own tail
2. Borrow money to buy your tail
3. Shop around and see if another carrier will write your wife a tail,
4. Negotiate hard with your current employer to buy the tail now,
5. Negotiate hard with your future employer to buy a nose,
6. Shop around and quote your out your own nose
7. Go naked.

Yes, you're right, it is a system that's set up to prevent doctors from switching. Insurance is a product and if it's not important to you, don't buy it; but you have to understand what you are buying or not buying. To me, it's a cost of doing business.

Many new doctors are going the employment route these days, so when employers say they will pay your malpractice, you need to know what that means. What kind of policy will they be buying? Am I responsible for my tail, because if so, you need to pay to leave (that's F'ed up but that's what that means)? This is something you need to understand, especially when you moonlight outside of your residency malpractice!

When I finished training and finished moonlighting, I asked for written copies of my tail. It's just prudent to go the extra step to make sure you protected yourself.

There are tons of of malpractice articles written in medical magazines all the time highlighting this issue, which is why I'm shocked that after 8 years, this is something that your family was not prepared for... I'm sorry to lecture you, but...

Check this article out; it might help:
http://www.modernmedicine.com/modernmedicine/article/articleDetail.jsp?id=197572

But search and keep educated so you don't fall into these kinds of pitfalls: http://www.modernmedicine.com/moder...?qgeneral=tail+malpractice&searchtype=defLink

If I were your family, I would negotiate hard and if unsuccessful, I would suck it up and pay it. I would be disappointed if after 8 years of practice, you don't have at least $28,000 saved up somewhere where you can access it.

Under no circumstances would I go naked, but that's just me and my risk tolerance. I think it's human nature to talk about someone once they've left the room (good or bad... then eventually bad) so for me, being a cynic about human nature, I would benefit from the added comfort knowning that I've purchased protection.

 

[lowbudget]

Malpractice: The scary truth about tail coverage
Publish date: Jul 9, 2004
By: Dennis Murray
Source: Medical Economics

Ways to avoid or soften the blow
Review a practice agreement with an eye to tail coverage


There's a cost crisis in this area of liability insurance, too. Here are some ways to ease the pain.

A middle-aged Ohio FP, fed up with a stingy employer, has been looking to leave his group practice for more than a year. So what's stopping him? A restrictive covenant? Fear of a big drop in income?

Neither. It's the cost of tail insurance, which he estimates will run about $50,000 if he leaves the group. "People assume that all doctors have this kind of money just lying around," he says. "I know I don't. I have one kid in college and two more headed there."

The FP's employment agreement specifically states that the group won't pay for tail coverage, which protects against claims that are brought against a doctor after cancellation of a claims-made malpractice policy. (A claims-made policy, as you're probably already aware, protects the policyholder from claims for acts that occur and are reported to the insurer while the policy is in force.)

Power Points
• Ask your present malpractice insurer whether it has provisions for free tail coverage.
• If you're switching insurers, find out if you're eligible for "prior acts" ("nose") coverage.
• Practice agreements should state that the employer will pay for, or contribute to, the cost of tail coverage.
• If you have no choice but to pay for tail coverage, see if you can spread out your payments.




"Tail rates are tied directly to malpractice rates, and it's no secret what's been happening to them," says Ron Neupauer, president of Medical Underwriters of California, the management company for MIEC, a doctor-owned professional liability insurer that covers more than 6,700 physicians in four Western states.

Currently, tail coverage typically costs 150 to 200 percent of the price of a mature claims-made policy. How much you'll pay will depend on where you practice and on your medical specialty. An internist in the Chicago area—who could be paying as much as $41,000 for a mature claims-made policy, according to Medical Liability Monitor, a Chicago-based newsletter—could be looking at a bill of almost $62,000 for tail coverage. Think that's bad? A Chicago area ob/gyn might have to come up with as much as $229,000!

Indeed, the crisis is primarily one of affordability, not availability, as all claims-made policies are supposed to include a contractual right for the policyholder to buy tail coverage if and when the policy's cancelled.

Ways to avoid or soften the blow
Does all this mean that the Ohio FP is doomed to a life of servitude in a group he'd rather see in his rear-view mirror? And are you also doomed if you decide to leave your current practice?

Maybe not.

In the best of all worlds, you may qualify for free tail coverage under certain circumstances if you've had your claims-made policy with the same insurer for many years. In New York, for example, Medical Liability Mutual Insurance Company offers free tail coverage to retiring physicians as young as 55 who have been insured for 10 years and with MLMIC for five. "Each company will have a different policy on free coverage, but it's certainly worth a phone call," says Stanley L. Pollock, a practice management consultant in McKeesport, PA.

What if you're not planning to retire soon? Assuming you pay for your own malpractice insurance now, you won't need tail coverage at all if you simply stay with the same insurer and keep the same policy while you transition to your new practice. "If you're moving to another practice across town or in the same state, this shouldn't be a problem," says Pollock. "If you're leaving the state, ask your insurer whether it's licensed to do business in the new location. You'll have to switch to another company if it's not."

If you do have to switch insurers, try timing your move. "Doctors who switch malpractice carriers at the end of the year are especially hard hit financially," says Lawrence E. Smarr, president of the Physician Insurers Association of America, a trade association of more than 50 professional liability insurance companies owned and operated by physicians and dentists. "They've already paid their premiums for that year, then have to come up with another, much higher amount to cover the tail insurance."

Another cost-saver: Try to get your new policy with a carrier that offers "prior acts" or "nose" coverage. This does the same thing as tail coverage, but you don't pay a separate premium for it. Instead you begin paying premiums for a new malpractice policy of similar maturity to the one you had with your old carrier, which factors in the risk the new carrier is assuming. If you were in your third year with your old claims-made carrier, for instance, you'll pay the new insurer's third-year rate. For fully mature claims-made policies, the nose coverage extends back to the effective date of the prior policy.

Just because an insurer offers nose coverage, don't assume you'll be able to purchase it. If you're currently in a group, for example, you may find yourself out of luck. "Most malpractice insurance companies won't give a doctor who's leaving a group prior acts coverage, because the liability for the old acts is hard to separate out," Ron Neupauer says. "When a group doctor is sued, the doctor and the corporate entity—both of which are usually named in the suit— are insured by the same company, and one lawyer is assigned to defend them both. That means if a doctor who leaves a group gets prior acts coverage with another insurer and is later sued, you have two insurers involved. Most liability insurers want to avoid that."

The new carrier may also refuse to cover prior acts if you've had a high incidence of claims or practiced in a litigious state. It may also refuse coverage because it doesn't have a relationship with any defense attorneys in the state you're leaving.

What's the answer then? Unfortunately, you may have no choice but to pay for standard tail coverage. The good news is that the premiums on your new claims-made policy will be low for the first few years, allowing you to better handle the additional cost of the tail insurance. Ask the insurer if you can spread the cost of the tail coverage over a couple of years, so that you're not hit with a big payment up front. A good company should be willing to work with you.

Don't forget, too, that you can write off the cost of tail insurance as an unreimbursed business expense on Schedule A of Form 1040, subject to the 2 percent adjusted gross income floor for miscellaneous business expenses.

What about simply going without tail coverage? "I wouldn't recommend that to anybody," Larry Smarr says. For one, going bare could put you out of business in a hurry: Some states require proof of malpractice insurance as a condition of licensure. It'll also be tough to get hospital privileges or health plan contracts.

Review a practice agreement with an eye to tail coverage
There's another way to escape the need to pay for tail coverage: Structure your practice agreement so that the group picks up the tab. Stan Pollock says that most agreements require a physician to pay for his own tail insurance if he leaves the group before becoming a partner; if a partner leaves, the group pays the cost of the tail.

So if you're thinking of joining a group, you ought to ask that it pay not only for your malpractice insurance but any tail coverage you might later require—whether or not you make partner before you leave. That could be tough to negotiate, but it's certainly worth discussing. "At the very least, the employer and the doctor should split the cost of the tail evenly," says Michael J. Wiley, a practice management consultant with Healthcare Management Consulting Services in Bay Shore, NY.

Even if you don't have to think about tail insurance for many years, now's the time to dust off your original practice agreement. "Some old agreements are silent on the topic of tail insurance," Wiley says. "If yours is, you should have it amended. Argue that the tail is to cover you for procedures that you performed while you were an employee and which your employer made money on. It should be a cost of doing business for the employer.

"If you don't amend the original agreement," he continues, "you might wind up with a surprise and an ugly fight if you try to leave the group."

Dennis Murray. Malpractice: The scary truth about tail coverage. Medical Economics Jul. 9, 2004;81:49.

 

[brats800]

lowbudget's 1st post above is excellent. our residency spends a month at the start of our 3rd year getting lectures about all of this. i found a job that will cover my tail if i ever leave.