Terms of Extended Reporting Periods, AKA Tail Coverage, to consider in your employment/independent contractor agreements for healthcare providers.
Written by Stephen Lim, Lic #0M66738
Having employees and/or independent contractors for your healthcare practice is vital to the success of your organization and the essence of providing care to individuals. Often with medical malpractice insurance, you can typically add additional mid-level and advanced-level providers to your policy as a physician or surgeon or even an entity policy. Usually, if they are W-2 employees, there is no additional charge to add them. For 1099-independent contractors, carriers might charge an additional premium. To start, it is important know whether or not your current policy is a claims-made policy or an occurrence-made policy. You can read more about this here. https://calattendingphysicians.com/blog/claims-made-occurrence-made-and-erp-medical-malpractice-insurance-policies
If Your policy is a claims-made policy and ultimately you are providing the coverage for the providers you are hiring, there are specific ramifications you have to be aware of, such as prior acts coverage for the provider, if they ever leave the organization. As an entity owner or individual healthcare provider, you will want to consider putting proper verbiage into your employment or independent contractor agreements to ensure that prior acts are covered for the provider that you hired, along with making sure you don't lose out if they only stay on board for a few months.
An example of the kind of verbiage you would want to have in your employment contract for providers you are hiring and providing coverage for should include the following:
You will want to have verbiage first to determine whether or not the provider you are hiring will be responsible for obtaining their own coverage or if you will be providing the coverage to the provider. Oftentimes, it might be a good idea to compare the cost of adding the provider to your policy vs. getting an individual policy. Depending on the circumstances, it may be more cost-effective to add providers to your own individual or entity policy. You would also be able to control the situation more and know that each individual provider has coverage in place. If you allow the provider to get their own coverage, you will need to make sure to check up on them every year to ensure that their coverage has been renewed, is still active, and has no new claims or issues. This is very similar to credentialing for insurance.
Another thing to consider is if you do provide the coverage for the provider, often, you may place verbiage that states that if they do not stay employed for more than 6 months, they will be responsible for the amount paid to add them onto your policy. This can be compared to tail coverage requirements for the provider.
Similarly to number 2, you can also use verbiage in your agreements to state that if the provider does not stay for more than 6 months or a given period of time, the provider will be responsible for obtaining their own tail coverage or obtaining tail coverage through the current insurance company you are with.
With all this, there should also be caveats to those who do stay on board with your organization and they should be afforded free tail coverage in case they leave at a later time after a vested period of time. This can be done through what's called a rolling IBNR which allows coverage to be extended to providers who have been with your organization and have left, as long as you keep your policy active, with no gaps in coverage, while maintaining the retroactive date.
Organizations and or healthcare practices also have many options in terms of providing coverage for ancillary providers such as nurse practitioners and physician assistants. Yes, you can get coverage extended out by your own policy, but some providers may prefer \ to have their own coverage. You may want to consider the ramifications of allowing the provider to get their own coverage. Additional responsibilities on the employer’s end would include:
Making sure you get a renewed certificate of insurance and can verify it with the company on a quarterly basis in case the policy lapses or terminates.
With obtaining updated certificates of insurance, if you are involved with insurance reimbursements, then they can get credentialed.
Make sure that you or your medical organization is listed as a certificate holder in this individual person's policy. This gives you some rights and authority on behalf of the policy as it is within the scope of working on your behalf.
There are many facets and many creative ways to go about creating a reasonable and ironclad agreement between you and your employees. I would encourage you to reach out to one of our dedicated specialists to discuss a plan of action in setting up your healthcare practice or managing it from here on forward.
