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When physicians think about buying insurance they tend to focus on medical liability coverage, and understandably so: It’s probably the largest premium they’ll pay and it applies to the risk that usually worries them the most.
But doctors may overlook other types of insurance that can be just as crucial to protecting their assets and livelihood—coverage for everything from fire and hacking to employee theft. In some states, certain forms of coverage are required by law, a mandate of which practices might be unaware.
“I find coverage holes all the time,” says Richard Weston, CIC, a senior account executive at Physicians Insurance Agency of Massachusetts. “Practices don’t know what’s required or what they need until it’s too late.”
Insurance needs vary among practices and not every practice needs every type of coverage, but here is a guide to some of the common forms, beginning with two often required by law:
Regulations vary from state to state, but many require small businesses with more than a certain number of employees to provide workers’ compensation coverage. This covers medical expenses and a portion of lost wages for employees who become ill or injured on the job. Coverage can also include employee rehabilitation and death benefits.
This type of coverage is relatively inexpensive, says Weston, who estimates the annual cost at 28 cents per $100 of payroll.
The Employment Retirement Income Security Act sets rules and standards for private sector employee benefit plans, such as 401(k)s, and the people that manage and invest their assets. ERISA requires fund managers to be covered by a fidelity bond to protect the plan from losses due to fraud or dishonesty. The coverage is specific to a practice’s retirement plan with the amount of required coverage at the lesser of $500,000 or 10 percent of plan assets. A bond typically lasts three years and can cost less than $500, Weston says.
This protects against claims for bodily injury and property damage arising out of operations, premises, and products. These policies are often required by landlords as a condition of leasing.
This covers damages to buildings, so a practice would obtain this type of insurance if it owns its own building. But even if a practice leases space, it needs this insurance to protect against loss of medical and office equipment, fixtures, and furniture due to theft, fire, water damage caused by broken pipes, etc.
Property insurance often is bundled with general liability in a business owners policy (BOP), says Patrick Lawn, owner of Physicians Insurance Consultants, an independent brokerage in Pennsylvania. A BOP also can be expanded to include worker’s compensation, cyber, and other forms of coverage, he adds.
Premiums depend on a variety of factors, including the size, age, and condition of the building; value of the contents; whether the building has fire sprinklers etc. A typical policy for a small practice might cost about $2,000 a year, Lawn says.
This is a relatively new form of insurance, but it’s becoming a necessity, even for practices that might think they’re too small to attract hackers. It covers losses and damages resulting from patient data being stolen, exposed, improperly shared, or held for ransom. It covers deliberate actions, such as hacking or ransomware, as well as accidents, such as a lost laptop containing unencrypted patient information or a coding error that exposes patient data.
A comprehensive policy will cover paper records as well, since so much information is still stored in physical files. It also should include first-party and third-party coverage. First-party coverage pays for damages suffered by the policy holder, while third-party coverage compensates for damages caused to others by the data breach, such as legal costs incurred from lawsuits filed by affected patients.
Malpractice and general insurance policies often include some cyber coverage, but usually not enough, Lawn says.
When shopping for cyber insurance, be sure the carrier is required to provide a comprehensive range of assistance in event of a breach, such as paying regulatory penalties, hiring IT experts to find and fix the breach, hiring attorneys to defend patient lawsuits, and paying ransom to free hijacked data.
This provides income in the event that a practice cannot function or bring in revenue because of an event such as a fire or natural disaster. It differs from property insurance in that it covers lost income.
Theft and employee misconduct
No practice likes to imagine misconduct from an employee, but it happens, says Kenneth Hertz, FACMPE, principal consultant with Medical Group Management Association. He advises practices to have every employee who handles money, whether cash or credit card payments, be bonded because “you never know when theft is going to raise its ugly head.”
This policy protects a practice if it’s sued for reasons such as discrimination and sexual harassment. Coverage protects the physician owners as well as claims against the staff, such as an HR manager. A 10-person practice might pay $1,500 a year for a $1 million policy, Weston estimates.
This coverage comes into play if a physician or other significant revenue generator is disabled and unable to bring in revenue. In that case, the policy replaces that income. This is particularly important for smaller and solo practices where the loss of one physician could threaten its existence.
Any policy should define disability as a physician no longer being able to work as a physician, rather than as complete disability, says Lawn. That is to prevent an insurer from denying a disability claim if a physician could perform a different job.
This provides medical, disability and, sometimes, life insurance for employees and owners. While these types of coverage are not always required by law it is difficult, if not impossible, to attract employees without offering them as benefits.
If an owner or employee uses company or personal vehicles to perform any sort of task related to the practice, such as making bank deposits, delivering lab samples, or picking up supplies, the practice could be held liable in the event of an accident. A commercial auto insurance policy can protect the practice. One way to avoid needing this coverage is by using couriers, taxis, or ride-share services, says Hertz.
It might seem with all these policies that a practice wouldn’t need any additional coverage, but experts recommend a policy to guard against catastrophic awards that exceed the limits of other coverage.
These umbrella policies, so called for the way they shelter everything beneath them, typically provide an additional $1 million in coverage. They can be written to cover a range of claims and cost roughly $500 a year for $1 million of coverage, according to Weston.
Necessary vs “nice to have”
Does a typical independent practice need every policy listed above? Not necessarily, says Hertz, who warns against buying so much coverage that a practice becomes “insurance poor.”
Some forms of coverage, such as worker’s compensation and ERISA, are required by law while others, such as general liability, employee health, and property are fundamental to a practice’s ability to operate.
Every practice must decide what other coverage it requires based on its exposure, tolerance of risk and ability to pay, Hertz says. He advises physicians seeking guidance to talk to colleagues about their coverage and experiences.
How to shop for insurance
Shopping for so many different types of insurance can be daunting and time-consuming. Many insurers offer most or all types of policies and it can be easier to go with as few vendors as possible. Insurers also sometimes offer discounts for bundling multiple policies.
Weston recommends using an independent insurance broker who specializes in medical practice coverage. “A lot of generalists aren’t as well versed in the risks presented by a medical practice,” he says.
But research the broker, adds Lawn: “There is a comfort level in using the same broker for all of your policies; however, is the broker contracted with the right companies? Your broker may not be able to provide you with the best priced carrier as they may not be contracted to represent them.”
Don’t be afraid to ask for discounts and use comparison quotes to negotiate a better deal, says Hertz, who adds, “You don’t get what you don’t ask for.”
And buying policies doesn’t require staying with the same carriers forever, adds Lawn, who recommends comparison shopping every few years to ensure the best pricing and adequate coverage.Written by James Sweeney