The insurance market changes just as the needs of clients change. Several years ago, if a physician wanted to leave a group or close a practice and join another group, he would have very few options. His current claims-made policy would be cancelled and his incumbent insurance company would have to offer an extended reporting period, otherwise known as a “tail policy.” If his current policy had an annual cost of $20,000, the tail policy would range from $36,000 to $44,000. This one-time payment would allow his policy to continue to respond to any claims that arose from the clients he had seen during his time working in his previous practice. In most states, the law requires the insurance company to allow the physician 30 days, and in some states 60 days, to purchase this tail policy. That is not very much time for a physician to pay for a policy that is often unplanned. A tail policy in most cases must be paid in full in order for the policy to be in-force.
With the passing of the Affordable Care Act, which has caused much movement within the healthcare industry, the need for these tail policies has greatly increased. Physicians are often lured into lucrative contracts with large hospital systems that promise to ease the burden that comes with running a thriving practice on your own. They offer signing bonuses and promise to take care of all medical billing to private health insurance companies. They also take on the task of billing the government for Medicare and Medicaid reimbursements. This is often very appealing to physicians who really want to focus on what they were trained to do – taking care of patients.
In the last five years, medical malpractice insurance companies have responded to this increased need, and many have begun to offer stand-alone tail policies. These companies will compete against the physician’s current insurance company to offer the same limits, endorsements and provisions of the policy at a lower premium. Some of the companies will offer deductibles to further decrease the premium. Companies often offer shorter tail periods, such as seven, five or even one year, which allows for significant decreases in premium. In some states like Florida, Diederich Healthcare has as many as 15 different underwriting companies offering stand-alone tail policies, so the competition is healthy. Many of the companies offering the tail policies are rated ‘A’ by A.M. Best or by Demotech. Some RRG’s (Risk Retention Groups) will offer these extended reporting periods that are even more customized to the individual physician’s need.To contact the author, call 800-457-7790 and ask for Jeff Ness.