How is tail coverage calculated in regards to cost? Let’s first talk about when a doctor would need tail coverage, who is responsible for it, and then what a good cost estimate would be. First, a doctor only needs tail insurance if he has a claims policy. claims made policy means that a policy must be in force when the claim is made. It’s possible that if a doctor terminates a contract, there will be a gap between the last day they work for the employer and the last day someone can sue them. in most states, it’s called statutory limitations.
How long can someone sue, and in most states, that’s two years. then, it is two years since the patient knows or should have known about the malpractice. that is why there are some incidents that can last more than two years if it would be impossible for the patient to know that a malpractice incident has occurred. If a doctor has a claims policy, someone needs to buy cola insurance. and then, in the doctor’s contract, it will say who is responsible for it. if not, it is a problem that needs to be resolved before signing the agreement. As for who pays for it, well, it depends on where the doctor works. First, if a doctor works for a smaller doctor-owned practice, more often than not, the doctor will be responsible for that final cost.
However, if the doctor works for a large hospital network, it is very unlikely that the doctor will have to pay the queue because that hospital network, depending on the size, will either be self-insured or always cover the queue for any of the doctors who are employed by them. there is another case in which the doctor would not have to pay the queue and that is if there is a policy based on occurrence. Under an occurrence-based policy, a policy must be in effect when the incident occurs. and so, that way, no queue is needed. the difference between the occurrence and the claims made is the price. an incident policy is typically a third more expensive than a claims policy. therefore, you will pay a third more per year. but then, you don’t have to pay that big part at the end for tail coverage.
Claims made are obviously cheaper per year. and when the doctor leaves, that tail policy will have to be paid. And that’s when that big cash outlay comes in. How much does tail insurance cost? when I talk to a doctor, I usually say that the best estimates are around double your annual premium. however, depending on how long the doctor has been with the employer, it could be shorter or longer. therefore, I think the best rate range is usually between 150% and 300% of what the annual premium is for that policy. The annual premium is simply what the employer pays to guarantee the doctor per year. take primary care, for example. A good rule of thumb is that primary care malpractice insurance is typically around $6,000 a year.
Now, it also depends on what state you’re in, but as a general general estimate, we’ll just say 6,000. In this case, let’s say, the doctor has been in for three years, they terminate the contract, and they move on to a new job. in that case, the final cost would be $12,000 or an estimate of $12,000. and if the doctor was responsible for paying that, then before their last day of care from that employer, they would have to purchase that policy, show proof of that to the employer and then continue. there are, I guess, two scenarios where a doctor wouldn’t have to foot the bill if he was responsible for it. First of all, they could always get their new employer to pay for their old tail and that’s called nose coverage.
Think of it as a signing bonus that the new employer will simply pay for the old tail, or if the doctor stays with the same insurance company. So if you are with an insurance company, your new doctor uses the same insurer, in that scenario they will usually transfer your old policy to the new one. then you won’t have to pay queue. Like I said before, most of the time, if you’re in a private practice owned by a doctor, the doctor won’t be responsible for paying the tail. now, there are a couple of ways to trade this. one, just tell the employer, I would like you to pay for my tail. if they’re not willing to do it, another scenario would be to split the cost based on how long the doctor was there.
I think a good way to do it is, say, a four-year contract. then the employer will cover 25% of the queue costs for each year the doctor is employed. therefore, if they are employed for two years and then leave, then they would split tail costs 50/50 with a new employer or with the old employer. that’s one way to do it. this is important for some specialties such as higher level surgical specialties, obstetrics and gynecology can have huge tail costs and absolutely need to be taken into account. If the doctor is an OB-GYN and you have to pay all of his queue, and he’s been there for eight years, he could have a hundred thousand dollars of queue cost, and he has to pay it all at once.
That’s a lot of money for just about anyone. So trying to find a way to split the employer cost is really one of the biggest points of negotiation when it comes to that. anyway, i hope i was helpful as to how the final cost is calculated, between 150% and 300% of your annual premium. the longer you are there, the higher the range, the shorter you are there, the lower the range.