Frequently Asked Questions

Frequently Asked Questions

Medical Malpractice Insurance – 101

Your medical malpractice insurance quotes and policies have their own terms, which you need to understand. By having a basic knowledge of the key terms of malpractice insurance you can be a more informed buyer and avoid costly errors.

Retro Date – There is no coverage for any wrongful act that occurred prior to the retro date. For example, if you have a retro date of 01/01/2001, you can submit a covered claim to your current carrier for claim that happened anytime after 01/01/2001. If the act occurred prior to your policy retro date, your carrier will not respond. Always make sure your retro date is maintained before changing your insurance company; if the date changes you lose insurance coverage.

Renewal Date – This is the date that the insurer has the right under your policy to change the price or terms of your coverage. You should get your renewal ideally 30 day prior, but no later than 2 weeks prior. Call your broker or insurer if your renewal offer is late.

Claims Made Policy– Most Med Mal insurance policies are written on a claims made basis. A claims made malpractice policy covers any eligible claims brought during the claims made policy period. There are two events for claims made medical malpractice coverage to apply. The incident must have occurred during the policy coverage period (from the retro date going forward) and it must be reported during the active policy year.

Tail Coverage or Extended Reporting Period – This is purchased when your claims made malpractice policy is cancelled: for retirement, the insurer non- renews your coverage or you cancel your coverage for any reason.

Full Prior Acts Coverage – This is term for malpractice insurance quotes that means the insurer is covering you back to your retro date. Always check the date on the insurance quote or policy.

Retro Date Inception Coverage – This means that the insurer is not covering your prior acts or back to your retro. They are only covering for acts that happened after your coverage goes into effect. If you buy this type of coverage, you should always buy tail coverage from your expiring/non-renewing insurance carrier to cover your retro date.

Step Up Rate Adjustments – When you have a claims made policy the rate will increase each year until your retro date is a full 5 years old. The reason is, each year the insurer adds one more year of coverage to the retro. If you have a retro date younger than 5 years you will receive an increase, as the insurer adds to its risk of a claim.

At five years completed retro date the policy is called a Mature Claims Made Policy. A Mature policy usually means that you will not have any additional premium increases unless you have changes to your risk (i.e. claims, new procedures…) or if the insurer decides to raise their overall prices.

Occurrence Medical Malpractice Insurance – An occurrence malpractice insurance policy covers any claims that occur during any policy years that you had the coverage. You do not have to buy tail insurance with this type of coverage, because it covers wrongful acts that occurred during the policy period, whether the policy is currently active or not. Occurrence Med Mal is more expensive because it has more coverage and eliminates the need for tail coverage.

Declaration Page – This page is normally toward the beginning of your insurance policy. It lists who is covered, the deductible, the limits of coverage, your retro date, your specialty, the effective date of the coverage and the annual premium. Always review the declaration page when you receive your policy and report any discrepancies to your broker or insurance carrier immediately.

Policy Exclusions – Always read this section in your med mal policy, especially if you have surgical malpractice or OB med mal coverage. If services or procedures that you provide are listed as excluded, call your insurer and/or broker to discuss this immediately. If something is excluded, you have no coverage for that item.

 

Frequently Asked Insurance Questions

Q: What is HMO reinsurance?

It is insurance that an HMO would purchase from an insurance company who agrees to share in a defined part of risk for a defined premium. One of the most common types of HMO reinsurance is stop loss reinsurance. An HMO might feel that it can pay all claims for the first $200,000 of medical expenses for any one member, but it does not want to absorb expenses beyond this level. The HMO agrees to pay an outside reinsurer who will reinsure the HMO, and reimburse it for claims above $200,000. The HMO will pay that reinsurer a per-member, per-month premium (pmpm). The pm pm pricing is the basis for the premium. The other typical reinsurance option is quota share reinsurance.

Q: What coverage do I need for my medical malpractice?

In California the norm for medical malpractice insurance is $1 million per occurrence and $3 million per policy aggregate. Other states have higher or lower limits depending on the rules and regulations within the state. If a doctor has privileges, his/her hospital will dictate the limits, and the hospital will know of any laws relating to these limits. If you do not have hospital privileges, ask your medical malpractice broker what is typical. There are 2 kinds of medical malpractice claims made: medical malpractice insurance and occurrence medical malpractice. Most doctors purchase claims made since it is more affordable.

Q: Employee benefits rescinding broker of record, who gets commission?

Commissions are paid monthly by the insurance company as you pay your premiums. If you fire agent A on 2/28 and hire agent B, and 2 days later, on 3/2, you rescind the broker of record on Agent B and rehire Agent A, odds are Agent A will not lose any money and Agent B gets paid nothing. The norm is that the insurer will give the current broker, in our example, Agent A, 10 days to receive rescindment of the broker of record. After 10 days the commission for March will be paid to Agent B. After 10 days if you fire Agent B and rehire Agent A, then Agent B will have 10 days to rescind the broker of record.

Q: How can public entities save money?

Competition is the key to saving money on insurance. You want a few insurance brokers working on your insurance. It is a lot of work, but the best way is to get multiple bids from 2 or 3 brokers including the incumbent. However, you need to be available to give the non-incumbent brokers the information they need to quote. We find many public entity purchasing departments favor the incumbent broker since he/she has all the loss run information and applications necessary to shop the insurance. The outside broker has little chance of competing unless you have a very diligent purchasing department at the public entity, which gets you the necessary information and answers questions in a timely fashion. We have seen very good purchasing departments, and many who are unresponsive, so the insurance stays with the same broker forever because you cannot get the necessary information to give a competitive quote and the public entity is then left paying more. Other ideas include hiring an insurance consultant to review your RFP to make sure that every item necessary to shop the insurance is included. This includes typical Q & A’s, and have the brokers provide their #1 through #3 favorite insurers for your risk, along with the premium that they have with those insurers. If more than one broker picks the same #1 insurance company, allow the broker with the most premium to have the #1 choice. The more premiums that a broker has with the insurance company, the better their relationship will be.

Q: What is Actively-At-Work?

A contract provision that provides that the coverage will only be available for employees actively at work on a full time basis on the effective date of the coverage. Those not actively at work on that date become eligible upon their return to work. The matching provision for dependent coverage is often a not-hospital-confined provision.

Q: What is a MEWA?

Multiple Employer Welfare Arrangement

Q: What is a MET?

A Multiple Employer Trust

Q: What is AD&D?

Accidental Death & Dismemberment

Q: What is meant by Administrative Services Only (ASO)?

An arrangement under which a company, for a fee, processes claims and handles paperwork for a self-funded group. This frequently includes all services (actuarial services, underwriting, benefit description, etc.) No assumption of risk is assumed by the company under this agreement.

Q: What is Adverse Selection?

The tendency of a higher risk persons or groups to seek coverage more less than risky persons or groups, for example, people with poor health applying for a higher benefit plan while those younger or of good health do not apply (or pay) for a higher benefit plan.

Q: What is Aggregate Factor?

The dollar figure that is multiplied by the number of covered persons each month during the contract period to calculate the Annual Attachment Point. It includes expected claims plus margin.

Q: What is Aggregate Stop Loss?

The form of excess coverage that provides for the employer against the accumulation of claims exceeding a stated level. This is protection against abnormal frequency of claims in total rather than abnormal severity of a single claim.

Q: What is Annual Attachment Point?

This number represents the overall limit of claim liability for the group (employer). Beyond this point the Stop Loss policy indemnifies the group at the end of the contract period. This is also called the aggregate deductible or trigger point.

Q: What is COBRA?

COBRA – Consolidated Onmibus Budget Reconciliation Act. Legislation relative to mandated benefits for all types of employee benefits plans. The most significant aspects are the requirements for continued coverage up to 36 months (30 months for dependents in the event of the employee’s death) for employees and/or their dependents under the plan which would otherwise lose coverage.

Q: What is Conventional Funding?

Fully insured plans. Typically premiums are paid monthly in advance and experience is not normally part of the policy provisions.

Q: What is Conversion?

An individual health policy issued to an employee or dependent leaving a group health plan. The conversion policy is issued without regard to pre-existing conditions at actuarially determined rates. The benefits are generally limited.

Q: What does Coordination of Benefits (COB) mean?

The contract provision that prevents a claimant form profiting by collecting from two different group plans. COB provisions provide for primary and secondary status for the various plans involved and seek to guarantee that the total paid by all will not exceed 100% of the out-of-pocket expenses of the claimant.

Q: What is Cost Containment?

Features in a plan of benefits or in the administration of a plan designed to reduce or eliminate specific charges to the plan such as charges for unnecessary surgery or hospital days thus improving the plan’s loss experience.

Q: What is a Covered Employee?

A person meeting the definition of eligibility in the employer’s plan document.

Q: What is Deposit Premium?

The amount required in order to place a Stop Loss policy in force, generally the first month’s premium.

Q: What is DRG?

Diagnostic Related Group. This is a prospective payment system that pays a set amount for a given diagnosis. If treatment actually costs less, the provider keeps the excess; if treatment costs more, the provider loses.

Q: What is ERISA?

ERISA – Employee Retirement Income Security Act of 1974. This is the basis of most employee benefit legislation. Even new laws and changes are normally designed as amendments to ERISA. This federal legislation allows for and sets guidelines regarding a group’s ability to self-fund their benefits. The legislation also establishes for rules, regulations, and standards.

Q: What is Expected Paid Claims?

An estimate of the dollar value of claims to be paid during the contract period.

Q: What is Experience Period?

A historical period with specific beginning and ending points for which paid claims and covered employees are known. To have a complete understanding of the experience period, it is also necessary to know what the plan design was, whether it was the first or subsequent contract period.

Q: What is meant by Final Enrollment?

A complete listing of employees covered on the effective date of coverage. They must be eligible by the definition established in the plan document.

Q: What is Final Underwriting?

A review of quoted rates and factors upon receipt of requested additional documents and data to firm up a conditional offer.

Q: What is Form 5500?

The annual filing form for ERISA.

Q: What is meant by the term “Ground Up”?

“Ground Up” refers to a claim from the first dollar payable by the claimant as opposed to the first dollar payable by the self-funded plan, the Stop Loss plan or the reinsurer of the Stop Loss plan.

Q: What is a HMO?

Health Maintenance Organization. This is an organization that provides comprehensive and preventative health care services for a fixed periodic payment capitation rate form the covered person (or the covered person’s employer) generally through owned (or contracted) facilities and a salaried medical staff.

Q: What is IBNR?

Incurred But Not Reported – a reserve for claims that have been incurred but not yet been submitted for payment. This is the reserve intended to cover claim run-out upon termination of the health plan.

Q: What is meant by the terms Incurred and Paid?

This is an expense both incurred during the contract period and paid during the same contract period.

Q: What are Incurred Claims?

This refers to the accrual method of accounting for all known and unknown claims. Includes paid claims plus adjustments for claims reported but not yet paid and those incurred but not reported.

Q: What is the Incurred Date?

The date the covered service is rendered.

Q: What is Lag?

The delay between the actual time a service is rendered, or an item is supplied, and the time it is paid and recorded. Lag includes both claims that have not yet been submitted, and claims that have been submitted and not yet paid. Lag is the result of administrative efficiency of the provider, the employer (if the employer involvement is required in supplying claim forms or verifying eligibility), the employee and the claim administrator.

Q: What is Lifetime Maximum?

(A) Maximum payable under the employer’s plan per person.

(B) Maximum payable under the Specific Stop Loss contract per person.

Please note that (B) cannot be higher than (A), but that (A) may be higher than (B), in which case the employer has an uninsured exposure.

Q: What is a Loss Fund?

A term of for the funds the group has (or should have) set aside for the payment of claims based upon the covered persons and the Aggregate factors. The Loss Fund should cover the expected claims and the margin.

Q: What are Manual Rates?

A rate or other factor based on actuarial estimates rather than on the group’s own experience. Manual rates are used when there is no history of previous claims available for underwriting the plan.

Q: What is the Margin?

The difference between expected paid claims and the Aggregate deductible. Granting that the expected claims will most likely be paid in any circumstance, the margin is the corridor of risk the employer is accepting in his self- funded program.

Q: What is the Minimum Attachment Point?

The lowest Aggregate stop loss attachment point to be used for a contract period, generally stated as a dollar amount or as a percent of the first month’s calculated Aggregate deductible time the number of months in the contract period.

Q: What is a Paid Claim?

Payment occurs on the date the payment check is issued (or the draft is drawn), provided it is promptly delivered to the payee and is paid upon presentation. Other definitions of paid focus on the date the payment clears or is recorded as cleared in the company’s records.

Q: What is a Participating Employer?

X company, and its subsidiaries, electing to take part in a trust sponsoring membership.

Q: What is a PPO?

A PPO is a Preferred Provider Organization. A group of providers that have banded together in hopes of preserving and enlarging their market share by providing discounted services to groups with which they have contracts. These organizations can be of two types: (a) one is risk-bearing and provides its services in exchange for a pre-set monthly payment; (b) the other is non-risk bearing and provides discounts off its usual charges.

Q: What is a Provider?

A generic term for doctors, hospitals, nurses, dentists, therapists, and others who provide health care services.

Q: What is Retention?

The portion of the contribution retained as its cost of doing business including services fees, claims, and other administrative expenses.

Q: What is a Schedule of Benefits?

An outline of the benefits described in the plan document. Often supplies the exact values of items referred to in the body of the plan document such as the deductible.

Q: What is Self-Funding?

The method of providing employee benefits in which an employer group does not purchase conventional insurance but rather elects to pay claims directly utilizing a Stop Loss Agreement to cover abnormal risks or large losses.

Q: What is Shock Loss?

A large loss that significantly affects the experience of a group. Generally claims on a single claimant during a single contract period.

Q: What is SIC?

SIC – Standard Industrial Classification Code. This is the statistical classification standard underlying all establishment-based Federal economic statistics classified by industry. The manual is available from the National Technical Information Services and is the guiding document for employer eligibility.

Q: What is Specific Stop Loss?

The form of excess risk coverage that provides protection for the employer against a high claim on any one individual.

Q: What is a Specific Deductible?

The dollar amount paid by an employer’s plan before the Stop Loss policy will reimburse additional expenses.

Q: What is Stop Loss Coverage?

A general term referring to the category of coverage that provides insurance protection to an employer for his self-funded plan. This is also known as Excess Loss or Excess Risk.

Q: What is a Summary Plan Document (SPD)?

The description of employee benefits required to be distributed by ERISA to the employees covered under a plan. A synopsis of the benefits, usually in simple language is also included, which does not include all details of the plan.

Q: What is a TPA?

A TPA is a Third Party Administrator. This is usually a non-risk-bearing company that provides claims and administrative services for a self-funded client.

Q. How do you get a medical leave of absence?

If you work for a company with fifty or more employees you may qualify for the Family Medical Leave Act, which typically allows up to twelve weeks for unpaid leave, or more if you are in the military. Also, your state may have its own laws that complement FMLA or add to this leave. Check with the Department of Labor in your state.

Q. What are the basic maternity leave laws?

This depends on the state, but the Family Medical Leave Act typically allows up to twelve weeks for unpaid leave. Also, your state may have its own laws that complement FMLA or add to this leave. Check with the Department of Labor in your state.

Q. What is the difference between claims-made & occurrence malpractice?

Claims-made covers you for claims submitted while the policy is in force, and also for a tort that occurred from the retro date through the date of the current policy. Occurrence policy covers claims that occurred during the policy period, and the policy does not have to be in force.

Q. Do IPA’s need medical malpractice insurance?

No, but they do need industry specific errors and omissions, and directors and omissions insurance that include vicarious malpractice, which cover the IPA’s risk for malpractice.

Q. What’s the difference between medical malpractice and errors and omissions?

They both cover errors; but, Medical Malpractice covers physicians for direct medical care and Errors and Omissions cover a business if it makes an error.

Q. What are reinsurance triggers in healthcare?

It depends. Health insurers can have a defined dollar amount where they are laying risk off to a reinsurer. For example, a health insurer may buy a $100K of specific reinsurance coverage; thus, if one patient hits a $100K, then every dollar above that amount will be reimbursed by the insurer.

Q. What are the two types of stop loss in hospitals?

1) Specific stop loss covers the hospital for claims that exceed a defined dollar amount for a patient. For example, the hospital for its self insured health plan, or its capitated members, can buy a $100K of specific stop loss deductible, which means the insurer will pay all claims that exceed $100K.

2) The other is aggregate stop loss which covers the hospital for all the claims it pays out in its self insured plan. For example, the insurer will cover you if your total claims paid in the year exceed $5 million. The insurer will reimburse the amounts that exceed that amount.

Q. Does a third party FMLA administrator have the right to contact your healthcare provider?

Yes, they have the right to ask for a second opinion, and/or have your doctor complete a form. But contacting them directly, I doubt, would be effective because the MD cannot talk with them due to HIPAA.

Q. What does it mean if your HMO sent a letter saying you have reached the catastrophic portion of your policy?

This can possibly mean that you have reached the maximum out of pocket limit.

Q. How can a company process employees’ medical claims?

The employer, if it is big enough, can take their claims in house and act as a TPA. Most companies do not do this anymore due to HIPAA concerns; most outsource this to an independent TPA.

Q: What the meaning of equal employment opportunity?

This typically applies to a business with fifteen or more employees that prohibits discrimination in any aspect of employment and harassment in the workplace based on race, color, age (40 and over), sex, pregnancy, gender, religion, disability, national origin, ethnic background, military service, and/ or citizenship.

Q. What is the ballpark estimate for directors and officer liability insurance?

It can be as low as $1,200 for a small business, to millions for a public company

Q. What is the typical annual premium for D&O in small business?

Typically it is $1,200 to $5,000.

Q. What is the cost for errors and omissions coverage?

This depends on the limits, industry, geographic location, and past claims experience. Some of the most expensive professions would be MD’s, Real Estate Brokerages, and Appraisal Firms, Insurance Brokerages, Engineering Firms and Law Firms.

Q. How do you apply for errors and omissions insurance?

You contact an insurance broker with expertise in E&O (it is an insurance specialty). The broker will have you complete an application; if you have coverage currently they will obtain your loss runs for the past five or ten years. The broker will shop your coverage to multiple insurers.

Q. How much is a $100,000 of general liability?

Assuming you are not in something risky, an estimate would be $100 to $500 a year. Most companies buy this coverage with limits in the millions.

Q. What is product professional liability?

As it implies in its name, it protects you from suits relating to the products that you produce, or a private label.

Q. Can you run a CA Family Rights Act with the Federal Family and Medical Leave Act?

Yes, CFRA and FMLA can run concurrently.

Q. Where can you buy medical malpractice coverage while on the US rotation?

If you are a resident of the US, you can buy it from a typical malpractice insurer. The problem is the policy will be for one year, so if you are here for less than one year, you will want to pay the premium and request a refund for any unused premium and buy tail insurance. Tail insurance is to cover you for any claims that occurred during the time you were covered. If you are returning to your home country and never plan to live in the US, you will want to consult an attorney to see what your exposure is versus buying tail insurance. When in doubt, buy tail insurance.

Q: FMLA versus workers comp?

FMLA is the Family Medical Leave Act. This provides job protected leave for non job related illness or leave to care for an immediate family member. Workers Comp provides benefits for job related injury disability or death.

Q: How do you qualify for FMLA?

To qualify for FMLA:

  • You must be employed for the past twelve months, prior to FMLA leave
  • You must work 1,250 hours
  • You must work for a company with fifty or more employees
  • You must work within seventy-five miles of your office or work site

Q: Do you get paid during FMLA?

No, this is a job protected leave and your employer has no obligation to pay you. Many employers will allow you to use vacation pay. I would call a labor attorney and confirm with them what rights you may have.

Q: Does the company need to retro FMLA when a manager did not tell an employee he/she may be eligible for FMLA?

This is a legal question, so we cannot respond. Contact a labor attorney because you may have a case.

Q: What happens when my employer denies my FMLA in California?

He/she may be in big trouble if he/she were wrong to deny it. Call a labor law attorney. The employer and any manager or supervisor, who is involved, is liable if they were wrong to deny your leave.

Q: Who is protected under the Americans with Disabilities Act?

All people with a physical or mental impairment that substantially limits one or more major life activities (i.e. sitting, standing, or sleeping) are protected under ADA. I would call a labor attorney and confirm with them what rights you may have.

Q: What are my rights while filing for disability?

This is a broad question. If you are injured on the job, depending on the state, you have certain protections. If you are on maternity leave, you can have twelve weeks of job protected leave under FMLA and more depending on the state. If you are not pregnant and do not file a worker’s comp claim, you are likely entitled to twelve weeks of job protected leave under FMLA. Lastly, if your disability is covered under ADA your employer under certain circumstances may have to keep your job open indefinitely. Always check with a labor attorney. Odds are that you have multiple areas of protection; and therefore, you have rights.

Q: Do I qualify for CFRA if my company has ten employees in our office, but our sister company has fifty employees?

This depends on whether the sister company is within fifty miles of where you are working. Is there any of the following: common management, degree of common ownership/financial control, any interrelation between operations? This is from the Federal Register page 68075, for your reference. If the answer is yes to all, then the answer would be yes you do have FMLA rights. I would call a labor attorney and confirm with them what rights you may have.

Q: Are grandparents entitled to CFRA?

Yes and no. If it is to care for an injured military person who was injured while on active duty and you are the only next of kin who can care for him or her then, probably, yes. See page 68079 of the Federal Register which speaks to FMLA, and models CFRA. Also, if you have been acting in “Loco Parentis”, meaning you are raising the child, and the parents are not, you may qualify under FMLA. I would call a labor attorney and confirm with them what rights you may have.

Q: How much is liability insurance for $1 million?

This totally depends on if it is general liability, $1K or less, assuming a white collar business. If it is Medical Malpractice Insurance the range can be as low as $2K, but the highest we have seen in CA in the standard market at $90K. For a low risk profession, single, with less than $2 million in revenue it is $3500; to a high risk profession (i.e. insurance brokers) at $6K. The highest we have seen for $1 million of coverage was $125K.

Q: What does capitation mean in provider excess loss?

Capitation is where an HMO pays a group of providers a defined amount of money to provide healthcare. If the money they collect is not enough due to a catastrophic patient, then the group will hopefully have in place a provider excess loss insurance policy (AKA Provider Stop Loss, Managed Care Excess and Capitated Stop loss, or Stop Loss Reinsurance). The policy allows the group to submit any claims they have usually after $15K or $20K is paid by the group for reimbursement.

Q: What is the difference between Standard versus Nonstandard Malpractice Insurance?

Standard insurance companies provide insurance for a certain risk profile: minimal claims, no medical board issues, and typical practice patterns. These insurers charge the least for coverage. The standard insurers have their rates filed with the department of insurance and they cannot charge more or less than those rates without COI approval. If a doctor does not fit the standard insurers underwriting requirements, then they are rejected in the standard market since the insurers cannot charge more than their filed rates.

Example: Dr. A is a general surgeon and a doctor who meets the standard underwriting. He would be charged $45K a year for his premium. However, Dr. B, another general surgeon, has lots of claims thus the standard insurer calculates that it should charge him $80K a year. But the standard insurer cannot charge $80K since the most it can charge is $45K, because these are the rates it has filed with the department of insurance. Thus it cannot accept Dr. B since he is a non standard risk. Now the non standard malpractice insurer does not want to be limited to filed rates so it does not file and does not have the oversight of the insurance department. It charges Dr. B $80K to insure him. The non standard market is the place for doctors, who cannot be accepted by the standard market. At HCP National we work to get all our clients into the standard medical malpractice insurers. While a doctor is stuck in the non standard market, we shop them every year to find them the best deal possible.

Q: How does stop loss insurance work and best practices?

One needs to analyze your past shock loss claims. If you have a group that has a 1000 or more employees, your experience should be somewhat predictable. Also, you should have past claims experience to set your specific level. In addition, see if you can reduce the stop loss premium by sharing some of the defined risk with the insurer (aggregating specific or retro).

Same for your aggregate, take your ECC (expected cash claims) plus trend, add 120%, 125% or 130% and compare it to what the insurer wants to charge. Also, hire a broker who has done millions of stop loss deals. Your broker’s job is to find the best deal on stop loss insurance for you and advise you on which stop loss levels to purchase.

Q: What is EPLI Insurance?

EPLI Insurance or Employment Practices Liability Insurance covers the employer for exposures relating to employment (i.e. discrimination, wrongful termination et al).

Q: What’s the difference between term life insurance and whole life insurance?

Term insurance is for people who do not want life insurance to be paid when they die of old age. It is normally purchased to cover a ten or twenty year period, like when someone with young children wants coverage in case they die prematurely. The premiums are cheap, but they skyrocket at the end of the term, so most people cancel the coverage. It seldom results in a claim, since most people who buy term buy it when they are young and healthy. If there is a term life death claim, it is usually the result of an accident or a premature death due to an unexpected disease.

Whole Life insurance is as the name implies, it covers your entire life. This insurance is for someone who wants coverage for their entire lifetime. Since this has a greater coverage period, it is more expensive. But on a net basis, whole life is cheaper than term life. When you pay your premiums, a small portion goes to the cost of the life insurance and most goes toward an investment. As you pay your premiums after twenty or thirty years, you likely will have double what you paid in premiums in the investment portion of the policy, called cash value. You can use the cash by borrowing it, or you can leave the cash alone, and it will likely (depending on the design) pay for your premiums for the rest of your life.

Q: What is the average cost of malpractice insurance?

We get this question all the time, and it depends on which state, specialty, the year of the retro date and the doctor’s claims. If you want a ballpark, in CA, a non invasive specialty, fully mature, with no claims is $10K a year, and an invasive specialty is $45K. If it is NY, multiply those numbers by three or four.

Q: How much is the most basic professional liability insurance for a small business?

It’s tough to say because it depends on what they do for a living, but a ballpark small business is $5K to $10K a year.

Q: What is Personal Injury Medical Malpractice?

This is a new insurance that allows the patient to buy life, and a product similar to AD&D for claims arising from complications related to a recent surgery. For example, if you die from complications of a surgery, then your family will get a death benefit. If you lose your limb(s) or other functions, then you get a benefit. This new insurance may lower the chances of claims against the surgeon. First, if a family or patient suffers a loss and they get paid under this policy they may be less likely to sue the doctor since they received compensation. Also, this may help negate a patient or family’s lawsuit claim alleging that the doctor did not provide adequate information regarding the surgical risk, and therefore never obtained informed consent. How would a patient claim that he/she did not know the risks if he/she buys insurance to protect himself/herself from the surgical risk?

Q: Are most ASO also stop loss?

ASO is administrative service only. These are the services that the employer needs to self-insure its health insurance; the business that performs this is called TPA, or third party administrator. ASO includes claims processing, utilization review, case management, PBM-pharmacy benefit manager, and PPO.

Stop Loss is the insurance that the employer buys to cover himself/herself for catastrophic claims that exceed a defined dollar amount (i.e. $50K or $100K). He/she would also purchase Aggregate Stop Loss Insurance. This covers the employer if his/her total annual claims exceed a defined amount of money. So do all ASO plans have stop loss? Not always. There are large employers who have thousands of covered employees that may feel they do not want to purchase stop loss, since their risk is very predictable. When it is not predictable, they have the necessary funds to cover bad years.

Q: Why do you have to issue a broker of record to a broker?

This is done when you want to hire a new broker to handle your insurance. Perhaps you currently have the best deal on your insurance, but you find another broker who provides more services than your current broker, and you want to change. You simply sign a letter addressed to all your insurers with your policy number which states, “I am appointing broker X as my new broker and please pay him/her the normal commissions that are being paid in relation to my insurance.” You should think about why you are changing brokers. Some clients sign this without knowing what it means or they think it is no big deal. It means the person who is handling your insurance now is going to be fired. It is similar to firing an employee. You would not do this for any particular reason. Also, do not do this midway into the policy if it is for group benefits. Inform your current broker, and make the change thirty days prior to renewal. Since the current broker did the work of shopping for all your coverage for free, and he/she is paid a monthly commission throughout the year, if you fire him/her midway into his/her policy then that money goes to the new broker for doing nothing. For all other insurance coverage you can make the change anytime after the renewal, since the broker gets paid the entire commission at the time of binding your renewal.

Q: What are reinsurance triggers in healthcare?

Not sure, but reinsurance can trigger on a specific basis, meaning a defined deductible amount or it can be a quota share where the reinsurer takes a percentage of risk over a certain dollar amount.

Q: What does D and O insurance mean?

Directors and Officers Insurance protects the current and former officers, directors, managers, and employees for claims arising from the operations of the company (not professional liability).

Example: an anti-trust claim or misuse of corporate assets or business interference.

Common Questions Specific to Workers Compensation & Excess Workers Compensation Insurance

Q. Can an employer stop group health benefits during workers compensation claims?

Yes; and the employer should. You have to check with your health insurer to see what the contract dictates, but most have a limitation that coverage is for full time employees working twenty-five or thirty hours a week. If an employee is on Workers Compensation, he/she is not working, so therefore, he/she is no longer eligible for group health insurance. You should offer him/her COBRA. If you do not do this, the health insurer can deny the claims of the employee. We know of an employer, which is not our client, who kept an employee on his/her group health insurance while the employee was on Workers Compensation. The employee had a massive heart attack while he/she was disabled. The employee mentioned it to the doctor, and it was entered into his medical record that he was out on a Workers Compensation claim. The employee was given open heart surgery that yielded a big bill, which the insurer denied since the employee was not eligible for health insurance at the time of the claim. The employer was sued for the bill and lost in court.

Q: Can my employer stop my health care when on comp?

Yes, unless you are on FMLA, CFRA or (CA Only; FEHL/PDL). The health insurer contract will often state that to be eligible for health insurance you must work full time and be actively at work. This may change with the healthcare reform, so stay tuned.  

Q: When filing a worker’s comp claim in California, when will the employer stop health coverage for an employee?

If the employee will not be actively at work or working full time, 30 hours a week in general, (please check your health insurance plan document), then the employer should put the employee on COBRA. Be aware that some workers comp insurers will advise you to keep the employee on health insurance for an indeterminate length of time. They advise this as a way to not anger the employee. This is very bad advice. If your health insurance states, which many plan descriptions do, that to be eligible for health insurance you have to be working a certain number of hours a week on a full time basis, it means it. Just because you choose to keep them on the plan and pay their premium does not mean they are covered.

Example: We heard of an employer who kept an employee on the plan while an employee was out for 6 months due to a work related back injury. The employee had a heart attack, while on his WC leave, and needed open heart surgery. In the physician’s notes, the patient told him he had been on WC leave. The health insurer denied the claim, since the employee was not eligible for health insurance. The employee sued the employer for the $150,000 hospital bill.

Example: The employer has very predictable experience, but he/she wants to buy excess workers compensation insurance with a $100K deductible. So for claims below $100K, the employer pays. For any claims that exceed $100,000, he/she submits for reimbursement to the excess workers comp carrier with whom he/she purchased the excess reinsurance policy.

Q. What do statutory limits mean on a worker’s comp policy?

In many states you cannot sue an employer for more than $1 million by law, excepting gross negligence; therefore, it is a law, so the insurance policy models the statute’s limits.

Q: What is excess workers comp?

This is for large to medium sized employers who want to self insure their workers compensation. They can purchase excess or stop loss reinsurance. This protects the employer from large claims. This insurance limits the employer’s exposure to unexpected total claims, or the specific claims of one person.

Q. Is excess workers compensation a liability policy?

Not excess, which usually refers to reinsurance – a self insured Workers Comp. However, if the question is, can you buy excess coverage or umbrella insurance to supplement the liability portion of Workers Compensation, the answer is yes. This is one of the reasons why one buys an umbrella for one’s company. If the Workers Comp limits are breached or used up, then the umbrella may respond. Please note that most states limit the liability for the employer to the limits of the Workers Comp policy unless there is gross negligence.

Q. What is worker’s comp aggregate retention?

This is the total amount of claims that you, the employer, pays until the insurer starts paying. If you self insure your Workers Comp and say if the past five years show your average claims with an inflation of $3,000,000 then a reinsurer may sell you an aggregate reinsurance policy that will pay all claims that exceed the expected claims of $3,000,000. The $3,000,000 is the aggregate retention or deductible.

Q. How do you account for workers compensation aggregate stop loss deductible?

When you purchase aggregate stop loss for your self-insured workers compensation, the insurer will define upfront what the aggregate is. Your TPA, or third party administrator, should give you periodic aggregate reports showing the total amount of claims paid as they accumulate toward meeting the aggregate stop loss deductible.

Q: What does a statutory limit mean on a worker’s comp policy?

Workers Compensation covers all employees for work related injuries at 100% of the medical bills. It has a disability benefit and life insurance. In return for these free benefits, the worker cannot sue the employer for more than what the statute says. In California, this is $1 million. The only way to get more than this limit is if the worker can prove gross negligence.

Example: an employer knew he had a faulty machine and let an employee use it and he/she is severely injured or killed. This is why all employers, especially those who can have a big worker’s comp claim should buy umbrella liability insurance, since this is the coverage that may respond if you have a claim that exceeds the workers compensation statutory limit. General Liability will not respond.

Q. What is excess of limit losses in workers compensation?

This can refer to an excess policy, which you can buy over a fully insured policy. Normally, workers compensation is limited to the statute, but if gross negligence can be proven then a claimant can sue for more than the limits of statute. If this happens, and the employer has an Umbrella policy, it may respond to the claim that exceeds the limit of the workers compensation policy.