All About Medical Risk Coverage

According to Investopedia, “studies show that medical negligence is the third leading cause of death in the United States.” In fact, they also report “a majority of American doctors face at least one medical malpractice lawsuit in the course of their career.” 

More likely than not, a healthcare professional will need to purchase malpractice insurance—also commonly referred to as medical risk, medical professional liability, malpractice, and medical indemnity insurance. 

What should you know before handing over your hard-earned money? How much might you expect to pay? Are there any standard exclusions you should keep in mind?  

This article will briefly cover medical liability insurance basics, the different types, exclusions, and how you can learn more. 

How Does Medical Risk Insurance Work?

According to MedicalDictionary.com, medical risk relates to the hazard of “an adverse outcome when performing a diagnostic or therapeutic procedure” or making a clinical decision. 

Therefore, medical risk insurance covers physicians and other licensed healthcare professionals against liability claims and disputes arising from negligence (intentional or otherwise), resulting in a patient’s injury or death.  

• Medical malpractice insurance covers costs related to:
• Attorney’s fees and other defense costs
• Arbitration and settlement costs, including punitive and compensatory damages (e.g., mental anguish)
• Medical expenses
• Bodily injury and property damage

Are There Different Types of Medical Liability Insurance?

Compared to other types, medical malpractice insurance can embody many different individual and group plans, such as those purchased from a private insurer, obtained through a medical risk retention group, and held by an employer (e.g., hospital, private practice, etc.). 

With these details in mind, the National Association for Insurance Commissioners (NAIC) explains that malpractice insurance is available in two basic types:  

• Occurrence-made – Covers losses that occurred during the policy period, although the claim can be filed even after the policy has lapsed. Practitioners can also purchase ‘tail’ coverage, which extends coverage beyond the policy’s cancellation for a specific time (e.g., three years, five years, etc.).
• Claims-made – The policy in effect when a lawsuit is filed is the one that pays for treatment and court costs.

What Are Some Common Medical Risk Insurance Exclusions?

The Insurance Information Institute (III) reports that medical malpractice insurance “does not cover liability that arises from sexual misconduct, criminal acts, and inappropriate alteration of medical records.” 

Additional common exclusions found in medical risk policies include: 

• Discrimination
• Clinical trials and other forms of medical research
• Claims involving drugs or other intoxicants
• Enhancement and enlargement surgeries, including Botox injections
• Failure to provide obstetrics services
• The administration of medications
• Unregistered or otherwise restricted medical practices

How Much Does Medical Malpractice Insurance Cost?

True Cost of Healthcare indicates 2010 total U.S. medical malpractice costs were in the range of $10 billion, which only represents a fraction of the $3 trillion spent on healthcare in 2016. 

Although relatively few, payouts for medical malpractice lawsuits tend to be substantial, which is reflected in policy premiums. For example, while a general physician might pay as little as $5,000 or $6,000 per year for medical risk insurance, this number can skyrocket to $200K or more for an obstetrician surgeon. 

The NAIC adds the following details: 

“The complexity involved in discovering negligence results in a higher percentage of premium dollars going toward defense and cost containment expenses. [Furthermore,] medical liability insurers spend substantial funds investigating and defending claims where there is an adverse patient outcome not resulting from negligence.” 

Other than the profession, additional factors that can impact how much healthcare providers pay for medical risk insurance include: 

• Limits
• Your claims history
• Your state’s tort laws
• Malpractice lawsuit incidence rates in your state

Given the high cost of medical liability insurance, do you need to purchase a policy? 

Who Should Consider Purchasing Medical Risk Insurance Coverage?

If you’re a physician, most states require that you carry medical liability insurance. However, anyone who works in a medically-related field might want to consider malpractice insurance, including: 

• Anesthesiologists
• Chiropractors
• Clinics and healthcare groups
• Dentists
• Emergency room physicians
• Home health aides
• Hospitals and healthcare systems
• Lab technicians
• Long-term care facilities
• Managed care
• Medical practices
• Nurses
• Nurse practitioners
• Optometrists
• Outpatient facilities
• Pharmacists
• Physicians
• Physician assistants
• Physical therapists
• Psychologists
• Registered nurses
• Schools or training programs
• Surgeons (e.g., obstetricians, neurosurgeons, cardiovascular, general, orthopedic, plastic, emergency room, etc.)
• Telemedicine/telehealth services

Depending on the circumstances, you’ll want to consider purchasing coverage not only for yourself but for any related business entities, such as corporations, partnerships, and limited liability companies, including their employees. 

Note: If you’re a medical professional who’s employed by a federal agency (or a state or local government, in some instances), they self-insure against liability claims. As such, you do not need to purchase malpractice insurance. 

It’s also important to emphasize that medical practices, which typically store large amounts of sensitive customer data on servers, may also want to consider purchasing cyber liability insurance, which protects against criminal breaches. 

Related: All About Cyber Liability Insurance 

How Can You Learn More About Medical Liability Insurance?

Other than some government employees, almost every state in the U.S. requires medical professionals and systems to carry malpractice liability insurance. But, this doesn’t mean you don’t have to pay more than necessary for coverage! 

The professional team at IHS Insurance Group will shop around between the nation’s top providers to find one that balances your coverage and budgetary needs. 

Do you need a FREE Quote or have questions regarding commercial insurance? Please fill out our quick GET A FREE QUOTE form, and an agent will get back to you at your convenience!   

We look forward to speaking with you today!