I’m a physician entrepreneur. In 1998, I opened my first clinic. My malpractice: $500 per year. Then I tried life as an employed physician. Hated it. So in 2005, I opened my ideal clinic. Best. Job. Ever. My malpractice: $1,230 per year. Want low premiums? Here’s how I did it.
A quick tutorial. New malpractice policies mature over five years. So the first four years you’re getting a deal. My insurer discounts: year 1 = 64 percent, 2 = 44 percent, 3 = 23 percent, 4 = 11 percent. In 2005, a mature premium for a family doc here in Oregon was $8,800, so at $1,230 I got 86 percent off! Ten years later, my 2015 mature premium is $10,326, but I’m still paying a tiny fraction of that. Here’s how.
Ask for discounts! My insurer offers: board certification = 2.5 percent, loss prevention CME = 7.5 percent, and part-time discounts (0.70 FTE = 30 percent, 0.50 FTE = 50 percent, 0.25 FTE = 75 percent). Same policy more than 5 years? Take another 10 percent off. The great news — discounts are cumulative!
Next step. Always inquire about state credits. Practice in rural Oregon? The state will reimburse your carrier up to 40 percent. Yep! Take off another 40 percent. This is in addition to the $5,000 state income tax credit for rural docs. Seem too good to be true? I called my insurer to confirm. On the low end of their 2015 Oregon annual premiums are internal medicine at $7,169, psychiatry at $7,275 and peds at $9,912. High end is OB/GYN at $77,233 and neurosurgery at $86,360.
Let’s do some quick math. Say you open a part-time solo practice as a board-certified internist in rural Oregon and you take all applicable discounts and the 40 percent state reimbursement credit. Your annual malpractice premium? $698. Take your $5,000 income tax credit and you actually get paid $4,302!
A part-time brain surgeon in rural Oregon? Same scenario with all discounts and credits, you pay only $3,412.
As a physician business strategist, I’m always teaching med students and docs how to save money and avoid poor practice decisions. Before signing with an employer or malpractice carrier, look for exclusions (some exclude defense for alleged sexual abuse or board actions). And know how you’ll cover your tail!
To cover your tail, you need tail insurance. For the novice, there are two types of malpractice policies: occurrence and claims-made. The less common occurrence policy protects you from a covered incident occurring during the policy period, regardless of when the claim is filed. Most policies are claims-made, and they cover you only when both the incident and claim happen when your policy is in force. So if you move to a new job and afterward a claim is made at your old job during the time you were “covered.” you’re not covered! Tail insurance allows a physician to extend coverage after termination of a claims-made policy. For a fee. Usually 1.5 times your premium.
Attention! Do not ever sign an employment contract without addressing your tail. When I left one job, I got billed 18K for tail! So at my last job, I negotiated my way out of the standard doctor-pays-tail contract. Then I left. They paid. Happy ending.
Most policies cover 1 million per incident and 3 million aggregate annually. High-risk specialties may purchase additional coverage — up to 5 million/10 million.
By the way, premiums vary wildly between specialties and regions.
Per ISMIE Mutual Illinois, here’s the mature rate for:
A Chicago family doc: $33,788 (> 3x Oregon).
A Chicago internist: $39,444 (> 5.5x Oregon).
A Chicago neurosurgeon: $239,204 (nearly 3x Oregon).
That’s for 1 million/3 million coverage.
Want a 2 million/4 million policy? That’s $362,396.
Rural Oregon is such a beautiful place for brain surgery.
Want to relocate? No problem. Your tail is $543,594.
Unless you plan to retire.
Then your tail is free.
At least in Oregon.
Pamela Wible pioneered the community-designed ideal medical clinic and blogs at Ideal Medical Care. She is the author of Pet Goats and Pap Smears. Watch her TEDx talk, How to Get Naked with Your Doctor. She hosts the physician retreat, Live Your Dream, to help her colleagues heal from grief and reclaim their lives and careers.