Demystifying Malpractice Insurance with Jennifer Wiggins, Aegis Malpractice
April 26, 2022
If you are an employed physician, chances are your employer purchases malpractice insurance for you. Your first introduction to the complexities of malpractice insurance may come when you leave that employer and have to buy a "tail." And, if when you start your own practice you'll need to understand how to get the best malpractice insurance.
Today, I chat with Jennifer Wiggins from Aegis Malpractice to help demystify malpractice insurance. Jennifer has over 16 years experience working for one of the country's largest malpractice insurers. In 2018, she left to start Aegis Malpractice, a broker specializing in malpractice insurance.
Here are some highlights:
- Difference between claims-made and occurrence malpractice insurance
- When do you need a tail?
- How often you should shop your malpractice insurance
- The key elements of a malpractice policy
- Attorneys and who decides when to settle a case
- Why your practice needs a malpractice policy (and not just the individual physicians)
- How to choose a malpractice carrier
- Do you need a broker and if so, how do you which one
We all know that malpractice insurance is a major expense. You want to make sure that your money is buying you the best policy for your practice. Jennifer and Aegis are offering a free, no-obligation review of your current malpractice insurance policy. You can learn more at https://www.aegismalpractice.com and be sure to mention this podcast.
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00:00:00 Hi, it's Dr. Weitz. Thanks so much for joining me for this episode of the private medical practice academy. Hi, I'm so happy to have Jennifer Wiggins from EGIS malpractice solutions hit with me here today to talk about, or try and demystify the whole malpractice insurance issue. And we're going to have a nice chat about what kind of malpractice insurance do I actually need.
00:00:29 How do I figure out what company I should get it from? And what are the key features in a policy that I'm going to want to have? So, Jennifer, welcome. Thank you so much for having me. So can you tell us a little bit about your background to start out with? Yeah, I would love to. So my quick commercial is I am a malpractice insurance nerd.
00:00:52 I have been in the med mouse space for almost 20 years, which seems kind of ridiculous. It means I'm really getting old, but my first 16 years in this industry, I worked for a company called medical protective, which is one of the nation's largest malpractice insurance companies based in Fort Wayne, Indiana. I basically started in the call center, moved up into a customer service role and in a couple of sales positions and near the end of my career there,
00:01:18 I was in a role where I was managing all of the business in a certain region. And I was also a new business producer. So what near the end of my career, what kind of catapulted me into this new agency world was, you know, I was meeting with doctors and administrators and going in, we really realized two things. Number one,
00:01:39 there's a big gap of knowledge when it comes to doctors, really understanding medical malpractice insurance, you know, we were doing a lot of educating on what's the difference between occurrence and claims made coverage, you know, which carriers better than the next carrier, what kind of policy features should I be looking for? So I realized there was a big need to fill in that gap of information in the marketplace,
00:02:02 but then secondly, you know, to be able to walk into an office and say, Hey, do you want to buy this one insurance policy from this one company that I work for, that didn't feel like I was really doing a service to the clients that we were working with. And so that prompted this realization that I really think I want to move into more of the brokerage world.
00:02:26 So after 16 years at med pro, I resigned from that role and launched EGIS malpractice solutions. And so with this new role at Aegis, we're able to fully focus on only medical malpractice coverage for physicians and surgeons and healthcare providers all across the spectrum. So our job now is to help providers understand the world of medical malpractice, get quotes from all of the available carriers in their particular area,
00:02:55 and then really understand what the options are so that they can select policy. That's going to be the best fit for their practice. So to that end, I think this is a great segue into, you know, how does somebody actually even start to think about which malpractice insurers to ask for boats from, because, you know, is it that I'm looking for the cheapest one or is it the one who has the deepest pockets for claims?
00:03:25 How do you even begin to assess a malpractice carrier? Yeah. So before I answer that, let me take one quick step back and I'll explain that the two ways that a provider can get malpractice insurance. So the first way you can get malpractice insurance is you can actually call the company directly. So you can call one 800 MedPro or whatever the carrier is in your particular area.
00:03:47 And you can ask for a quote that way now not every carrier sells direct. So some carriers, if you call them, they'll say, great, happy to help you, but you're going to have to work with one of our agents. And so they'll refer you to one of their partners and you'll have to get a quote through that avenue for that reason,
00:04:05 the second way that a doctor can get malpractice insurance is to go through an agent, which is what we are at EGIS malpractice solutions. So going through an agent is different because you're not working directly with the carrier. You're working with an independent third party that is basically giving you like not their opinion. They're basically getting you quotes from every single carrier, with no skin in the game,
00:04:29 in terms of, I don't really care, which one of these you pick my job is to present you with all of the available options and then help you figure out which one's going to be the right fit for your particular practice. So you can either go directly to the carrier or you can go through an agent. Obviously, I think working with an agent has much more appeal and saves a lot of headache and legwork and gives you more access,
00:04:54 but you can do one of those two things. And so I think one of the things that people are always concerned about though, when going through an agent is do agents actually push you towards one carrier versus another because they get more of a commission from one carrier than another. And how do you, how do you mitigate that? Yeah, it's a great question.
00:05:18 So, you know, you need to make sure that it's an agent that has access to a wide variety of carriers, because what can often often happen is if you work with an agent and they only give you one quote or two quotes, because it's the only two carriers that they have access to that doesn't really do you any good because you don't know that they're only showing you the two carriers that they have access to.
00:05:40 So it is important that you do some leg work upfront to make sure that the agent that you're engaging with has a wide variety of carrier options. And that they're very experienced and knowledgeable in the space of medical malpractice. Because the other thing that, you know, we often see as a healthcare provider who says, oh, well I know Johnny Smith agent who goes to the country club with me and he does my,
00:06:05 you know, my work comp and my business owner's policy and my life and health. And he can probably help me with my malpractice too. Well, sometimes that's not the right answer because he may not have that level of knowledge and detail in that specific industry. And therefore doesn't have all of the options that you really need to make sure you're getting the variety of options that you truly need.
00:06:27 And then yes, you do question, you know, are they only showing me the carriers that they have the highest commission on? Are they only showing me the carriers that they have access to? So those are, those are definite concerns when it comes to working with an agent. So tell us the difference between claims made and occurrence, because I know that's a tremendous source of confusion for people.
00:06:51 And how do you figure out which one is the better one for you? Yeah. So let's take a quick step back and talk about the differences between them. And then we'll talk about when one might be the right fit over another. So the way that I try to explain the difference between occurrence and claims made, comes down to how the insurance is triggered.
00:07:11 So if you buy an occurrence malpractice policy, your coverage triggers based upon when the incident actually occurred. So as long as you carried the malpractice insurance at the time that the service was rendered, the patient was seen, the surgery was done. You will have coverage for that incident. Even if the claim isn't filed for a year, two, three down the road.
00:07:35 So an occurrence policy is the most flexible policy type that you can get because you only have to carry the insurance while you're practicing. After you're done practicing, you can simply cancel the policy and walk away and you're done. You still will have protection. Even after that insurance has been terminated for any potential claims down the road for patients that you treated during the years,
00:07:59 when that occurrence policy was active and enforce. So occurrence, coverage triggers based upon the incident occurrence date, the other type of insurance that you can buy is called claims, made coverage and claims made coverage triggers the opposite way. So claims made coverage triggers based upon when the claim is made against the healthcare provider. So a claims made insurance policy is really two policies in one.
00:08:27 So you have to carry the insurance, obviously while you're actively practicing, because in case a claim gets made against you while you're still working, you have to have an insurance policy in place, but with the claims made policy, when you cancel that coverage, you have to secure a second policy and that's called tail insurance. I'm sure most of your listeners have heard of the dreaded tail insurance.
00:08:51 So absolutely. So tail insurance is unique only to the claims made policy type. There is no tail insurance required for occurrence. Coverage claims made is the only one that needs tail. So the tail is purchased at your cancellation date. And essentially what that does is it extends the length of your protection into the future. In case any claims are still made against you for patients that you treated during the years in which you were previously insured.
00:09:24 So claims-made is a 201 policy. You got to carry it while you practice. When you cancel it, you've got to buy tail to then cover you in the future going forward. So that's the difference between the two policy types, obviously then there's a difference in premium as you might suspect. So occurrence coverage is generally a little bit more expensive occurrence coverage is a very stable premium that she would pay the same rate,
00:09:51 basically the same price year over year over year. So let's just say, for example, the occurrence premium for your particular specialty and area is $10,000 a year. You would pay $10,000 for your first year, $10,000 for your second year, $10,000 for your third year and so on and so forth. The claims made policy works a little bit differently because of the nature of how that policy works may remember,
00:10:16 this is the policy that only triggers insurance based on when the claim is made against you. So your first year in practice, the chances of there being an incident and the claim being filed is relatively low. So your first year of claims made coverage, your premium is a little bit less. So maybe for that same example, your first year on a claims made policy may only cost you $2,000,
00:10:42 but then the second year that rate goes up. So maybe your second year now you're going to pay $4,500. Your third year, it's going to go up again. Maybe your third year. Now you're paying $6,000 your fourth year, it goes up again, maybe now you're paying 8,500. By the time you reach the fifth year of that claims made policy,
00:11:05 then your premium is considered mature. So there's no more stepping up after the five years, but at five years, you'll essentially pay that mature premium every year, years, 6, 7, 8, 9, 10. And so on the fifth year price is usually only about a 5% difference to what you would've paid for an occurrence policy. So if you would have paid 10,000 for the occurrence,
00:11:30 your claims made mature premium is probably going to be like $9,000 or $9,500 a year. But again, the claims made has the tail at the end. And the tail is generally two times your mature premium. So if you're paying $9,500 for your mature claims made premium, by the time you go to your tail, you're looking at two times that cost. So you're looking at now $19,000 basically to buy your tail when you're done.
00:12:02 So this is a great example of pay me today or pay me tomorrow because in the end there is no free lunch, right? And I think for the folks that are listening a lot of times when you're first starting out, or maybe you're a doc, who's thinking about hiring an employed physician, right. It seems like you're getting away cheaper by getting that claims made policy because indeed those first five years ramp up.
00:12:36 But you need to think through who's ultimately going to be responsible for paying that tail. Yeah. Certainly if you have, if you're going to hire an employed physician to join your private practice, then you're going want to think about who's going to pay for the tail and put that in the contract. Correct. The problem is, and this is my question to you,
00:12:58 Jen, what about the, the doc who owns the practice hires this employed physician? The contract says you have to have a tail, but then there's no way to really make that employee doc who's left by that tail. Talk to us about the liability. Does the practice then have the liability for that? How does that work? And so, you know,
00:13:28 do the, does that owner physician then have to factor in, okay, what's the cost to be in case that employee doc doesn't end up buying that tail? Because So that's the sticky wicket, right? Because you're exactly right. That a smart practice is going to put that tail language in the employment agreement at the time that they hire that provider. And it does much in the provider's best interest as it is in the,
00:13:57 in the practices best interest because all parties need to know upfront is tail required when this person leaves. And if so, who's responsible for buying it and whoever's responsible for buying it. The terms need to be very clear of how long they have to purchase that tail and what the ramifications are if they choose not to. So if for some reason that's maybe not clearly laid out upfront and a provider leaves and it's maybe on bad terms and they just say,
00:14:25 screw you I'm out of here and they don't buy the tail. What does that mean for the practice? It means that they are in trouble because if a claim comes in naming that provider that has departed and the practice, the practice will still have insurance because assuming you've set that up correctly, you're still going to have malpractice protection for the practice itself under the entities policy.
00:14:52 But that provider who has left, if they're the primary person named in that claim and they didn't buy any tail it's as if they are uninsured. So that puts a lot of onus on the practice because essentially you have an uninsured provider and potentially that means more liability is going to fall on the shoulders of the practice because that person walked away without coverage. So you definitely don't want to get into that situation because it makes it very,
00:15:20 very difficult for the practice. And quite frankly, if that person is foolish enough to not buy tail, that's going to cause issues for them individually going forward, because it will be very difficult for them to find new malpractice insurance, if they mark on their application, that they didn't buy tail when they departed their previous employer. So this brings me to a key point Mo when I buy malpractice insurance as a practice owner,
00:15:51 all right, right. As a doc, then essentially that malpractice only covers me. Correct. Right. So how do I get my practice covered? I, you know, I, I think there are a lot of doctors who don't realize that, you know, if their nurse calls in the wrong drug or, you know, the person at the front desk tells the patient,
00:16:15 who's calling with chest pain, oh, it's probably indigestion. And doesn't send them to the ER, right. That the practice has liability. But because those people are not insured, right. It's really only the, the physician or the mid-level. Right. How does the practice get insured? What does that look like? That's a great question. And you're exactly right.
00:16:37 That it's frequently overlooked because we oftentimes are only thinking about the healthcare provider themselves getting coverage and not any other business entity. So the rule of thumb is always the name on the door has to be covered in some way, shape or form, because that is the name that you're putting out to the public that you're going to market under, whether it's John Smith MD,
00:16:56 LLC, or whether it's ABC pediatrics, that needs to be insured in some capacity. So there's two ways that you can cover a medical entity from a malpractice perspective. The first way is you can have a shared limit policy. So if you're just a solo provider and you work in your practices, ABC pediatrics, if you don't have any other physicians working with you or any other,
00:17:19 mid-levels working with you, it's just you and RN, a medical assistant, maybe somebody else you can have your entity endorsed under your policy at no charge in most states and want to make sure I articulate in most states, because as you well know, from your experience in Louisiana and I'm in Indiana, a lot of the fund states do not allow this.
00:17:40 So I want to say as a general rule of thumb, this is allowed. So you can have your entity covered under your individual malpractice at no additional charge. However, what that means is that you're sharing your malpractice policy limit with your entity. So if you get sued and ABC pediatrics also gets named in the lawsuit, and let's say you have a 1 million,
00:18:04 3 million policy limit, then that means you only have $1 million worth of coverage to protect you and to protect your business entity. You're essentially sharing insurance between the two named insurance, but it doesn't cost anything generally to have a shared limit endorsement added onto your policy. Now that's the first way you can cover it. The second way, the safer way is to actually write an entity insurance policy for the practice itself.
00:18:34 Now, there are several benefits of doing it this way. So if you're you have your own individual policy, and then you get ABC pediatrics, its own policy, what that means is that you get a policy limit for yourself and the practice gets a policy limit for itself. What's nice about that. Is it insulates the two insurance policies. So you're not,
00:18:54 you know, sharing insurance between the two of you. You get your own coverage, the practice gets its own coverage. It also means that you can kind of create this umbrella coverage for any other mid-levels that you might want to hire. So if you do want to bring on a nurse practitioner or a physician assistant or anybody else like that, you can actually cover them under that entity policy.
00:19:18 And that we don't have to get insurance for them. One by one, you can actually just cover them underneath that entity policy. And that would be sufficient coverage to cover all of those individuals. So each physician or surgeon would get their own, and then the practice would need its own. That's generally the way we recommend it, especially if you're going to have mid-levels working for you.
00:19:39 And it's not very expensive usually to get that insurance. So again, let's say your premiums $10,000 a year, it's usually like a percentage of your premium is how much the carrier will charge for an entity policy. So if yours is 10,000 a year, your, your entity policy will probably be 900 bucks. So aside from figuring out claims made occurrence, what other things do I need to look for in a malpractice policy?
00:20:11 I know that, you know, one of the things that we all think is that we're never going to get to, and yet the statistics are that sooner or later, if you practice long enough, you will get to. And I think one of the issues that I've always seen is this tug of war between the insurance company. And when you are going to settle a claim versus what does that actually mean to the physician?
00:20:41 So is that something that's covered in a malpractice policy? Like what language I look for? Yeah, that's a great question. So certainly when you're comparing insurance, you want to be looking at the price because the premium, you know, is a big ticket item for a lot of providers. So you want to make sure you're smart on which are what your premium choices are.
00:21:01 But beyond that, there are many other things that are important for you to take a look at. And one of those is exactly what you mentioned, which is called consent to settle. So it's incredibly important that a healthcare provider gets a malpractice policy that has a pure consent to settle provision. And here's what that means. Pure consent to settle means that a malpractice carrier cannot settle a claim without your direct written approval to do so.
00:21:26 So why does that matter? It matters because if you have a claim and you feel very strongly, very confidently that you met the standard of care and that you didn't do anything wrong, but if the insurance company is worried about the potential outcome and they would rather just settle it, write a check and get out of it. If you don't give them the okay to do so.
00:21:47 And they go ahead and settle that case, then you now have that on your record. So now you have to, it gets reported to the national practitioner data bank that you've had a loss against you, all future malpractice applications. You have to disclose that you've had a claim, all future credentialing for hospital and other third party entities, where you have to actually show your claim history that obviously gets reported there as well.
00:22:11 So it's important if you're the one paying the premium and making sure you're, you're getting coverage. It's important that you have a voice in how you want those claims to be handled. Because again, if you feel strongly that you've met the standard of care and there was nothing wrong in that particular incident, then you should be able to advise on whether or not you want to settle when it comes to a malpractice case.
00:22:35 So that is a very important aspect when you're looking at coverage options, Which kind of brings me to a side question when I, when somebody has a malpractice claim and obviously it needs to be litigated who pays for the attorney? Is it the insurance company? Do I need to get my own attorney? And if, if it's the insurance company that's paying for it,
00:23:02 is it sometimes that they want to settle just because they don't want to keep paying the attorneys. Yeah. Yeah. It's a good question. So this is another one of those things that as you're comparing carriers, it's important that you take a look at, and this is called defense costs inside of limits or defense costs outside of limits. So what you want is you want to look for a policy that gives you defense costs outside of policy limits.
00:23:25 And here's what that means. Again, if you have a $1 million policy limit, and let's say it costs the insurance company, $20,000 to pay for an attorney to settle that particular case, what you don't want is for them to take that $20,000 any road out of your malpractice limits, because that would mean you would potentially less available to you to pay for any results of the case.
00:23:50 So you definitely want a policy that has defense costs outside of policy limits, but generally speaking, the malpractice carrier will be the one that'll cover that cost for you. So they'll hire the defense attorney, they'll make sure all of the expenses are paid for court fees, expert witnesses, the attorneys, and everybody are all paid. And again, you just want to make sure that that doesn't erode your available coverage.
00:24:14 You would prefer to have a policy where defense costs outside of policy limits. One thing you can do, however, most carriers will give you the option. If you have a particular attorney that you really like, maybe you've worked with them before and they handled your case very well. Most carriers will give you the option to select an attorney. If you have one that you prefer to use,
00:24:38 if you don't have a preference of which attorney to use, then they'll simply select somebody from their panel. And, you know, the, the really good carriers, the quality insurance companies, they're only using the very best medical malpractice defense attorneys anyways. So you really don't have to worry too much about them hiring somebody that may not be competent because it's obviously in their best interest that they want somebody that's going to do an excellent job of handling the case.
00:25:02 But do you, in your experience, do you see that they push people to settle because they try and cap their legal costs or are these attorneys that work for these carriers are basically on salary. So it doesn't matter how many hours they put into it, because I wouldn't want to have a case and know that I'm in the right, but there are the companies going,
00:25:27 oh, well, we already spent this much on a lawyer and we just want to be done. Yeah. Yeah. Most of the attorneys that the big carriers work with are not on contract. So they are paying them an hourly fee or whatever their going rate is. But yeah, I mean, you, you do have to be very cautious and I think it's one of those questions you should ask when you're comparing insurance carriers,
00:25:47 maybe to even ask them, what's your defense philosophy? How aggressively are you fighting cases? How often are you going to trial? And if you go to trial, how often are you winning the carriers that are really experienced and very confident in their legal team and their claims team are the ones that are going to court a lot, because they're not afraid to go and fight the case because they know 90% of the time they're going to win.
00:26:12 So that, that's one of the other things you want to take a look at beyond premium beyond what kind of insurance do they offer? You know, you're looking for consent to settle. What's their financial stability. How aggressive are they when it comes to trial win rates? Do you know all of these other things that are really important when the rubber meets the road,
00:26:31 because this is the whole reason why you buy malpractice insurance. So it's important that, you know, upfront what your premium is going towards. So, but the folks who already have malpractice insurance and are listening to this, how often should people actually look at shopping their malpractice insurance? How often should you change your malpractice carrier? Are there advantages or to doing that,
00:26:57 or are you better off kind of just sticking it out? Yeah. So there's a couple of different ways you can go about looking at it. So first of all, you don't want to be on one end of the spectrum and you don't want to be on the other end of the spectrum. So you definitely do not want to be the constant shopper.
00:27:15 So you don't want to be that doctor, that every single year you're going to market and you're shopping around again and again, and again and again, because you're not doing yourself any, any advantage or any service to doing that because what's going to happen is you'll start getting a reputation of a, of a shopper. And so you won't have any carrier that will have any sense of,
00:27:34 of loyalty to you in terms of really ensuring that they're giving you their best possible rate. They're just going to look at you as a sticker shopper. And so nobody's going to really give you a serious consideration to try to win your business. If they know that every single year you're going to shop it again and again and again, on the other end of the spectrum,
00:27:53 it also is not wise for you to just set it and forget it. So it's not wise to just buy insurance your first year in practice and then put in your filing cabinet and pay your renewal every year and never pay attention to what's either happening with your rate or what's happening in the marketplace, because you could very easily find yourself in a position where you're now overpaying significantly,
00:28:18 because you've never gone to market and really forced a little competition to make sure that you're getting the best possible rate for your coverage. So we really think there's a happy medium there where, you know, a savvy doctor should probably be going to market every three to five years at least to look at what the options are. Now, I'm not suggesting you should change your insurance every three to five years.
00:28:41 But I do think it's important that every three to five years you have an agent go to market, shop the options and present you with what basically where's the market at currently, oftentimes that will just reassure you that you're still with the right carrier. Sometimes it will show you that, oh my goodness, my carriers rates have been going up for years and I didn't even know this.
00:29:02 And then it'll kind of help you start unpacking. Why is that happening? Maybe if maybe it should still stick with them, if there's some real justification for that, but it's smart to at least keep your eyes on the horizon and kind of know what else is happening in the marketplace. So we recommend every three to five years, you should at least get some additional quotes and kind of just do that,
00:29:22 you know, test of, does this still look fair and reasonable or should I be looking for other options? Well, to that end, is there any opportunity to negotiate with your existing carrier? If I go out and I shop it, let's say at that three to five year mark and my current carrier is, you know, significantly more than everybody else.
00:29:45 Is there any value in coming back to that agent and saying, go talk to the carrier and say, we'd be willing to stick with you, but your rates are too high. Yeah. So, you know, the, the whisper answer is yes, there's definitely a benefit to doing that. However, I will tell you, so insurance, just like many other types of products is highly regulated.
00:30:06 So there's a department of insurance in every single state and all of the admitted market carriers have to file their rates with the department of insurance. And what that means is they have to tell the department of insurance is that for this type of a provider, with this type of a policy, we're going to charge this rate. And we, they do that for fair practices to make sure that everybody's on the up and up.
00:30:26 There's not any one person trying to gouge the next person. The department of insurance has to approve those rates. And if they find that a carrier is not charging enough, they're going to, they'll tell the carrier. They need to adjust. If they're charging too much, they have to tell the carrier that you need to take some rate decreases. So the department of insurance does a really nice job of regulating and making sure that there's kind of a level playing field among all of the carriers that being said there is wiggle room.
00:30:54 So there are two different types of credits or discounts that carriers can apply to your premium. There are discretionary credits and there are non-discretionary credits. So non-discretionary credits are credits that you're going to earn based on standard criteria that are part of that filing that the department of insurance has to approve. For example, if you're part time. So if you're working less than 20 hours a week,
00:31:19 they're filing, that'll say, if you work less than 20 hours a week, you qualify for X percent off of your premium. If you haven't had any malpractice claims for a given time. So maybe if you've gone three years without a claim or five years without a claim or 10 years without a claim, most carriers have non-discretionary credits. That'll say you qualify for a 5% credit when you get to this threshold and a 10% credit when you get to this special-ed.
00:31:44 So those are non-discretionary credits. Meaning if you meet the criteria, they have to give you that discount. There are discretionary credits, which are up to the underwriter's discretion that can sometimes come into play. If you have an issue of, you know, exactly what you said. So it's a loyal client. That's been with the company for 10 years, 20 years.
00:32:09 They've never shopped around before, really, but now they've come to us at renewal. And the agent is saying, all right, if you guys want to renew this business, you're going to have to come down a little bit on price. So there is some wiggle room within that discretionary credit level that they can oftentimes reduce their price. Now it's not huge.
00:32:30 I mean, we're talking about single digit percentages that they can probably adjust, because again, because of that department of insurance filing, you can't have some cavalier underwriter, just throwing huge credits on premiums, because then it's going to be a competitive disadvantage. And one doctor would be paying significantly less than another doctor, even if they're the exact same risk. So there is a little bit of wiggle room when it comes to that.
00:32:57 So my last question, talking about risks, and when you have multiple physicians inappro, if I, if I have, let's say more than one doc list, we'll call it three and two have never had a claim. And one has had one or more claims. Is there an advantage to having everybody insured with the same carrier does that because we have multiple docs and one has less risk,
00:33:33 does that benefit or to have less risk and one has more, does it benefit the practice as a whole? Or if we have a physician who has more risk, are we better off trying to isolate them in a different, with a different carrier? It's a good question. So there's, there's really two ways you can look at it and, and,
00:33:56 and I'll address your immediate question first, which is premium related. So normally if it's a group of, let's say 20 or less, so it's, it's a, it's a, it's a mid to small sized practice. It's not a, like a large multi-specialty practice, right? Generally in those situations, the way that the underwriter is going to price,
00:34:16 those risks is still going to be on an individual basis. So your two doctors who haven't had any claims are still going to get the, the relevant non-discretionary credits for their individual risk profile. So let's say the one guy has been in practice for 10 years with no claims. He'll get the appropriate discount for that. Let's say the other guy's been in practice for five years with no claims.
00:34:36 He'll get the necessary discount for that. If your third doctor has had some claim activity recently, normally any credits or lack of credits or even premium debits, which sometimes can happen if somebody's risk is, you know, outside the normal parameters, that would only affect his individual premium. So it would not affect the practice as a whole. It would only affect the person who is individually responsible for it.
00:35:05 Now, if it's a group of 20 or more, or like a large practice, a lot of times those practices are not individually rated. They are lost rated, which means instead of pricing, Dr. Smith's rate is this Dr. Jones, his rate as this Dr. Miller's rate is that they are looking at the exposure at a macro level, and they're looking at the total loss picture for the entire practice.
00:35:30 And then they're coming up with a rate that would be comparable for the picture as a whole. And the reason why do that is because generally that makes the price better. Because as a bit, if it's a good performing group and it's, you know, 25 doctors and they've got excellent loss history, then they're all 25 going to pay the same price.
00:35:48 And it's going to be less than what they would pay if they were individually rated, because they're going to get that group rate discount. But if you've got a bad actor in that group of 25, it could affect the risk picture for the whole practice. Now it's not going to throw it completely askew, but it could, you know, adjust the overall risk picture for everybody.
00:36:11 So as an administrator or the president of a practice, you would want to be very aware of that. So if you've got a guy that's causing problems, it may make sense to carve them out and insure them separately so that they don't taint the waters for the rest of the practice. Now, usually when we run into a situation like that, we still try to keep that doctor with the same insurance company.
00:36:35 We just pull them out of the group and have them insured separately, because there are still advantages to everyone in the practice being with the same insurance company, because from a defense perspective, if there's a claim and it names more than one provider, it's generally better that everyone has the same coverage, particularly if it's high quality coverage. So that way, you know,
00:36:57 all of the people that are involved in the case have a hundred percent consent to settle. You know, what policy limits they have. You can obviously then determine if you want one defense attorney to handle it for everybody, or if you want to assign different defense attorneys for different people, but generally speaking, it's best for all individuals in a group to be with the same carrier.
00:37:18 Even if you do decide to pluck one guy out and have him insured separately. And I think that the other point here is that if you are in private practice, or if you're an employed physician going into private practice, you may find that the malpractice premium that you pay is very different. When you go from that group setting to going out on your own.
00:37:43 Similarly, if you are in private practice and you are looking to hire a new physician, you really want as part of that employment prop potential employment process to understand what their previous risk history is, and because it's going with affect their malpractice premium. So before you offer that person a job, particularly if your contract says that you're going to cover their malpractice while they are an employed physician,
00:38:13 you want to understand their previous risk history, because it's going to impact what their malpractice costs is going to be to your practice. Correct. So on that note, Jennifer, thank you so much for joining us today. I'm sure you and I could be here for hours talking about this. So if any of you who are listening, have questions, feel free to reach out to me.
00:38:36 And then Jennifer's info is going to be in the show notes below. Have a great day. Thanks for joining me. Please be sure to sign up for my newsletter below, I'll be sending you tips on how to start a practice, grow a practice, and then add multiple services so that you can maximize your revenue.
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