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6 Things an Ophthalmologist Should Know About Malpractice Insurance

Did you know that you will pay nearly half a million dollars in malpractice insurance premiums over the course of your career? Here are some tips when evaluating your insurance policy that could save you tens of thousands of dollars and take full advantage of current and potential benefits you may not have realized are already available to you.

Reward yourself, not others.

Do not underestimate the dividend advantage. While publicly-traded insurance companies are pressured to meet shareholder expectations and to produce consistent quarterly profits for those shareholders, physician-owned carriers tend to operate in service solely for its policyholders, since those policyholders are usually also the “owners” of the company. The return of profits (above which are needed to prudently operate the company) to policyholders through dividend distributions or credits may translate into tens of thousands of dollars over the course of your career. Clearly everything should be considered in concert with everything else, in other words your net base rate must be sufficiently competitive over the long-term (look at a rate history of at least 10-15 years to account for both favorable and unfavorable insurance cycles) for the dividend “advantage” to be a key factor.

Avoid these like the plague.

Be wary of policies that are “assessable.” Under these policies the insurance company charges an initial premium, with the stipulation that it retains the right to charge you additional premiums, even years in the future, if their losses for that particular policy year exceeded the premiums originally collected. Insurance “trusts” are often subject to assessment. Also carefully weigh the requirements associated with “claims-paid” policies, where the policy is not triggered until the claim is paid, as opposed to when the claim was reported to the carrier. These policies may be more restrictive and not allow for switching to a new carrier while a claim is active, which could last for several years.

Be encouraged, not irritated, if your carrier asks a lot of questions.

Ophthalmologists or their administrators sometimes lament “long” insurance application forms, however it is important to remember that insurance is a shared pool of risk assumed by your carrier and the premium you pay is directly related to the collective claims experience of the carrier’s policyholders. In other words, if a carrier has weak underwriting standards that result in higher average payouts, this must be accounted for in higher rates or lower dividends. Applaud a carrier’s conservatism and competency when evaluating risk, as you will ultimately benefit through cumulative savings.

Don’t settle for the sticker price.

Research the ways you can lower your premium. Carriers often give discounts for risk management activities, loss experience, group or network associations, and practice characteristics such as hours per week, types of procedures performed, and length of time in practice. Make sure you’re getting all available discounts to reduce your net premium. Surprisingly, many policyholders never take advantage of the opportunity to reduce premiums by participating in risk management activities even though the time required (usually about an hour) and the credit earned (usually $500 – $2000) is probably a more monetarily “rewarding” event than a typical patient encounter. Education that enhances risk reduction also may be long-term “investment” as poor claim history requiring you to enter a higher cost “non-standard” insurance market could be particularly costly going forward.

Don’t overcompensate.

Don’t automatically assume that higher liability limits are always the best option for your practice. When it comes to insurance this may simply distinguish you as a bigger target. A good rule of thumb is to prepare for the average not the outlier, and choose adequate but not excessive liability limits. There are several ways to determine appropriate liability limits. First, ask your carrier if they can identify the level of coverage maintained by the majority of ophthalmologists in your area. Second, look for required minimum limits in any contracts with hospitals or outpatient facilities, health plans or networks, and even lease or employment agreements. Third, ask your carrier about the frequency of high settlements or verdicts and likelihood of a claim exceeding average limits. Answers to these questions should give you a general sense regarding reasonably adequate limits for your area and specialty.

Be multifunctional.

Don’t ignore the value of “added” benefits in your policy. Risk management resources not only help lessen your (and your carrier’s) risk for claims and suits but also provide you an opportunity to distribute “ready-made” employee training materials. Look for sample forms, documents, or guidelines that will help your staff work more independently. Often claims are triggered by experiences your patients have with ancillary staff when you are not around. Make sure they know how to handle difficult situations that present in the office. Risk prevention hotlines or consultative services are particularly valuable. Added protection for your medical entities, ancillary staff, or regulatory exposures such as billing errors, privacy violations, premises contracts or licensure, or security breaches could fill coverage gaps and supplement or eliminate the need for other policies.