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This article by Barbara Fox was prepared for the November 20, 2002 edition of U.S. 1 Newspaper. All rights reserved.
Nuts and Bolts of Malpractice Insurance
I like physicians and I like dealing with the profession,"
says Robert Cottone, an insurance agent who sells malpractice insurance.
"What I get emotionally tied up in is how the malpractice insurance
crisis is affecting physicians’ practices and how they can serve their
patients. We had longstanding customers in Pennsylvania who begged
us to find someone to cover them and we had no place to put them and
no alternatives for them."
Cottone comes from a family of physicians — his late father was
a well-known urologist, and his grandfather and uncle were general
surgeons. As the leader of the health practice at Rue Insurance, which
has offices at 3812 Quakerbridge Road (609-586-7474), he has insured
hospitals, nursing homes, and other healthcare organizations. An economics
major at Bucknell, Class of ’82, he spent 15 years with a major brokerage
in south Jersey and moved to Rue three years ago and has hundreds
of clients in malpractice and health care. He represents three of
the leading malpractice companies in New Jersey — Princeton Insurance,
MIIX/Advantage, and Massachusetts-based Pro Mutual, as well as younger
companies, such as Conventus, a Woodbridge-based startup.
Physicians pay the same premium whether they buy directly from the
insurance carrier or use an agent to sort out the best deal. "As
agents we put ourselves in the same category as other professionals,
lawyers and accountants. We’re an independent agency and I work on
the physician’s behalf," Cottone says. "We can cover more
than one company. In the past coverage has been cut and dried, but
particularly now, with the malpractice insurance marketplace in a
total crisis in New Jersey as well as in Pennsylvania, the doctors
really need assistance."
To determine how much malpractice insurance to buy, healthcare professionals
should consider these factors:
to a plaintiff. "Many doctors used to carry $5/$7 million or $6/$8
million limits to protect themselves in high hazard specialties, but
plaintiffs are looking for deep pockets," says Cottone. "If
you don’t have that high a limit perhaps they won’t go after that."
to their patients. General practitioners, Cottone says, are suffering
rising premiums because of an unusual number of lawsuits. "There
is an increasing number of claims for failure to diagnose. The irony
is that most people think of GP being a low hazard specialty, but
the GPs are covering a wide scope of potential problems and this leaves
them open to a broader array of claims."
At the low end of the premium scale are oncology, hematology, pathology,
geriatrics, rehab or physical medicine, podiatry, and non-surgical
ophthalmology. A pediatrician who does not do surgery might start
as low as $6,000 a year and go up to $15,000. In the middle category
are gastroenterology and urology. "Anesthesiology used to be in
the middle but is spiking rates, says Cottone.
Surgeons, emergency room doctors, orthopedic surgeons, and obstetricians
are in the highest-paying group. "The obvious hot button these
days is obstetrics," says Cottone. "We have had obstetricians
opt for early retirement because they could not afford or obtain insurance,
and we have had OB/GYNs who have dropped the OB." Philadelphia
has had so many OBs close down that pregnant women have to wait three
months for their first appointment. For standard liability, $1 million
per claim/ $3 million aggregate for any one year, the rate at the
low end of the scale for a full time OB/GYN is $50,000. "It averages
about $90,000 and we have seen it as high as $200,000 for doctors
with adverse claims experience."
"I had a group of obstetricians who worked for a hospital in south
Jersey," says Cottone. "They had a contract to buy out their
practice from the hospital and operate it independently. They had
a target date. We searched high and low and were unable to get insurance
at less than $200,000 per person for a group of three, and they had
to postpone their goal and continue working for the hospital."
And contrary to popular opinion, doctors aren’t usually netting significantly
more money than junior executives. Overhead and malpractice costs
are going up and reimbursement is going down in the squeeze by managed
care companies. There are cases where a private practice obstetrician
may be netting less than $100,000 a year.
Some doctors employed by a hospital may have the advantage of more
readily available coverage and price because of the larger institutional
master policy. Physician group practices can be put on a master policy
for better coverage and pricing.
"The added value of the malpractice companies is in the risk management
services they provide to the doctors, some at no cost, some with a
fee. Some companies have risk management departments that will come
into a policy holder’s practice and help them with loss prevention
and overall risk reduction."
When traditional insurance is not available, doctors turn to policies
that have premiums lower than for traditional insurance in the first
few years. But if doctors opt to get out of these policies early,
they may incur heavy exit costs.
Bills are pending to put caps on judgments. But what is also needed
is reform on the ability of plaintiffs to bring frivolous claims,
says Cottone. Frivolous cases on a doctor’s record drive up premiums
as much or more than a catastrophic award. "The physicians pay
the price for any claims presented against them, even those that are
dismissed, because the malpractice insurance company still has to
spend tons of money defending the case."
— Barbara Fox
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