Paid-Claims Policies . . . Pitfalls and Perils

Paid-Claims - Watch Out For PerilsPhysicians may be attracted to a Paid-Claims medical professional liability policy type because of its lower initial price compared to Claims-Made or Occurrence policies. While they all have their differences, the Paid-Claims policy type is one that needs the most understanding before purchasing. Here is why:

First, you need to examine the coverage trigger definitions of each policy type. The coverage trigger is the “event that must occur before a particular liability policy applies to a given loss.” Let us look at the triggers for three coverage types.

 

Paid-Claims vs. Claims-Made vs. Occurrence:

Comparing Insurance Policy Triggers

Occurrence – The trigger is the occurrence of the injury or damage. Liability will be covered under that policy if the injury or damage occurred during the policy period. With an Occurrence policy, once you pay for the policy, no matter when a claim is filed in the future, the insurance carrier that was in place at the time of the injury or damage will respond to the claim. The buyer needs to feel confident that the carrier will still be around for many years to respond to any future claims.

Claims-Made – The trigger is the date the claim is made, which can be long after the date of the actual injury or damage. Should the insured or carrier cancel the policy, the insured may need to purchase an Extended Reporting Period (known as a Tail) which would allow claims to be reported in the future for professional services rendered during the policy period(s). If the insured is moving to another carrier, the new carrier may be able to pick up “Prior Acts”, meaning the new carrier may be willing to pick up coverage from the first date of the current Claims-Made policy. In this case, the insured does not need to purchase a tail.

Paid-Claims – The trigger is the time a claim is paid. Therefore, if a claim is filed, the insured must remain on the policy until it is closed. This approach can offer significant benefits in terms of pricing accuracy for the insurance carrier offering the coverage, since premiums are based on overall expected costs for the next twelve months rather than estimates of future claim payouts. However, since claims will be paid only while the policy remains active, the insured facing a claim cannot cancel the policy while the claim is pending, often for years, unless he or she is willing to pay the claim out of personal assets, or purchases an Extended Reporting Period (Tail).

 

Bottom Line Advice:  “Avoid Paid-Claims Policies”

In summary, Perron Insurance Services advises professional service providers to avoid the Paid-Claims policy type due the inability of an insured to move coverage while a claim is pending without purchasing a Tail. We believe that carriers will often non-renew coverage or increase rates when they receive notifications of claims they expect to pay out, even if not for several years.

 

References:

IRMI – International Risk Management Institute, Inc. (IRMI) http://www.irmi.com

The Risk Retention Reporter, January 2004

 

Morton’s Fork – Modern Medical Malpractice Thriller

Book Review by Michelle Perron and Chuck Sink –

Morton’s Fork is a modern medical drama set in 2012 revolving around the life of Doctor Roger Hartley, an extremely hard-working and dedicated 46 year-old physician. Here is a man who sacrifices most of his waking hours, at the expense of his dear and precious family life, to care for his patients within a healthcare system that seems only to punish an individual’s professional dedication and care.  Morton’s Fork stages a cast of characters who represent most of the major healthcare constituencies of today. They include two physician co-workers of Doctor Hartley’s hired by an insurance conglomerate to control costs, members of insurance companies who have the right to deny care, a plaintiff patient, a big name malpractice lawyer and political activists from both parties. Dr Hartley’s wife Celeste and his four children are also critical to the story’s plot.

Early in the book, the family and professional life of Dr. Hartley are each painted vividly and then skillfully interwoven as the professional side of his life begins to supersede and overwhelm the family life.  Emotionally and spiritually, Dr. Hartley’s actions begin to spiral out of control after he is presented with a lawsuit from an uninsured non-compliant patient.  A series of subsequent events cause him to commit a rash and irresponsible act born of arguably justifiable passion. A national high visibility trial ensues as a result, publically exposing systemic problems in the U.S. Legal, Political and Medical communities.

During Doctor Hartley’s trial and the events leading up to it, the reader gains an understanding of our current healthcare issues, including Tort Reform, Defensive Medicine, and the Patient Protection and Affordable Care Act, aka “Obama Care.” All sides are presented with thoughtful arguments. Villains and heroes evolve as the story unfolds.

The book is a page-turner in league with some of the best thriller novels.  The undercurrents go much deeper than exploring legal-medical-political issues in the country. The author skillfully plants moral and spiritual challenges throughout the book that each reader can ponder for himself.  The shocking ending will literally stun the reader into deep contemplation. It begs the author for a sequel in 2013.

As an insurance broker specializing in helping physicians with malpractice insurance, I can see Doctor Hartley in many of my clients; overly dedicated physicians who care for their patients with increasing expenses and reduction in payments from insurance carriers. I have seen physicians struggle with many frivolous malpractice cases and often wonder how they still practice.

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The author, Doctor Coy is a Board Certified gastroenterologist practicing medicine in group practice in Illinois.  He graduated from Ohio State University School of Medicine and completed his training in Internal Medicine and Gastroenterology at Northwestern University.  Most notable is his philosophy of care in an accurate and expedient diagnosis of the patient’s illness and adherence to the highest quality of medical care. His bedside manner is professional and friendly while treating patient problems.

What to Consider When Choosing Your Insurance Advisor

With insurance rates continually on the rise and increasingly complicated regulations, it can be one of a business’s biggest cost outlay and headache. Therefore it is critical to make sure you pick the right insurance professional to help guide you through this process and to be your ally and champion.

Let’s say you are a physician with a medical practice. Your patients trust and depend on you to provide them with the best care for their particular symptoms and diagnoses.  You provide a physical examination, send them for additional tests if necessary, and assess their needs in order to develop a treatment plan.

Time-and-MoneyWhen you work with your insurance agent they should do a preliminary analysis of your needs much in the same way that you do with a patient. The insurance should be designed to cater to your specific business and your particular specialty needs and provide you the best coverage at the lowest possible premium.

An insurance agent that you trust can be a huge asset. Not only can they do the legwork for you to find a well-suited insurance company, they help shop for the best rates, and most importantly, explain the ins and outs of your plan. How do you find a reputable agent? Check credentials with your state’s licensing board.  Make sure they have proven experience in your industry. Chances are if they do, they will have a good handle on any special insurance needs and watch outs that are particular to your business or medical practice.

Once you identified the possible agents, here are some questions to consider:

  1. What is the motive of your insurance agent? Especially consider how your insurance agent is being compensated for their work. Is he/she being paid by the amount of commission dollars brought into the agency?
  2. Does your insurance agent understand your practice and uncover potential ways to reduce your premium? An insurance agent who is knowledgeable in your specific industry will know many of the ins and outs that pertain to your line of work and should be able to efficiently help you navigate to get to what is pertinent for your business.
  3. Does your insurance agent obtain all eligible credits to reduce your premium? With the constantly changing regulations, you need someone up to-date to make sure you are getting everything your business is entitled to keep your premiums low.
  4. Does your insurance agent keep you up-to-date in offering ways to reduce your risk exposure? This is particularly key if you work in a high-risk industry such as physicians who must carry malpractice insurance or contractors who need to carry workers compensation.
  5. Does your insurance agent handle multiple insurance lines or does he/she specialize in the coverage you need and keep up with training in that specific area? Someone current, knowledgeable and an advocate for you is a true asset to your business.
  6. Is your insurance agent on your team? Does your insurance agent represent your best interests or the insurance carriers? Are they independent of the insurance carriers and therefore free to shop multiple carriers for the best rates? Does your insurance agent advocate for you?

Advocating for clients and meeting their needs is a great quality to look for in an insurance agent. Recently, a physician was being added to a practice and required malpractice insurance to be able to start right after a holiday weekend. The agent he contacted not only worked after hours and was willing to communicate back and forth with the client during the holiday weekend in order to obtain the right information so that the underwriter would have a full submission waiting for him on Monday morning.   Because the submission was thorough, the underwriter was able to quickly review the information and provide approval enabling the new physician to start with the practice right away. This is an example of having an insurance agent who is on your team, willing to go above and beyond to get you the right coverage at the right price when you need it.  In today’s increasingly complicated world of insurance, having an ally can make all the difference.

Michelle Marie Perron is principal of Perron Insurance Services, a Hampton-based insurance firm specializing in physician insurance needs and passionate about protecting your practice’s health. For information visit www.perronservices.com, e-mail mperron@perronservices.com or call 603.926.1318. You can also follow her on Twitter @perronservices or Facebook at Perron Insurance Services or LinkedIn www.linkedin.com/in/michellemarieperron.