Medical Malpractice Insurance Primer
Medical malpractice law was enacted in the U.S. in the mid-1800s as the medical profession began to grow in its sophistication and scope of care. It’s no surprise that many of the early cases of medical malpractice came from the larger cities such as New York City due to the number of people concentrated in large metropolitan areas. Advancements in medical technology and physician training have certainly improved the quality of care in the U.S., but there is no way to eliminate the possibility of medical negligence.
The New York medical malpractice environment is similar to other areas of the country, but it has fallen behind in relation to the trend of decreasing numbers of malpractice claims and in a lower severity of payouts currently seen in many states. For example, at least 30 states have put in place a limitation on the dollar amount for pain and suffering in medical malpractice lawsuits. New York on the other hand has no such limitation and, in fact, in a recent case, Reilly vs. St. Charles Hospital, a jury awarded one of the highest verdicts in state history in the amount of $130 million.
The current debate in New York centers around medical malpractice reforms. There is pressure from medical providers and insurance companies to enact laws to reduce the number of claims and the number of potential payouts. These groups argue that reforms would lower medical malpractice premiums for physicians and other providers and that savings would in turn bring the total cost of healthcare down in the state. On the other hand, patient advocate groups and attorneys claim that higher verdicts help reduce the amount of medical negligence by sending a message to doctors that malpractice claims are serious, and the consequences are severe. A similar debate has been going on at the federal level, as well.
Despite some of the challenges, physicians and other healthcare providers have choices for purchasing coverage for medical malpractice in New York. Physicians unable to get coverage through the private insurance companies because of claims or other restrictions can obtain protection through the Medical Malpractice Insurance Pool (MMIP), which is run by the state and must extend insurance to all applicants.
New York Medical Malpractice Basics
- Highest number of payouts in the U.S.
- Highest dollar amount of payouts in the U.S.
- Total Number of Dollars in Paid Claims: $763,000,000
New York doesn’t have any significant medical malpractice tort reforms that have been enacted in other states. In some states, law makers have legislated limitations (caps) on the total dollar amount of damages a patient can receive for pain and suffering, rules and guidelines on expert witnesses, and restrictions on trial venues. Most of the reforms that have been passed in New York have had little or no impact on malpractice insurance rates. As in most states, New York has tried to implement medical malpractice reforms in the past. In the 1970s and mid 1980s, several bills were enacted that attempted to bring premiums for medical malpractice insurance down and eliminate frivolous malpractice cases. In New York, these attempts haven’t been successful in that premiums are relatively high compared to other states, the number of options for coverage have remained limited, and claims frequency and severity have not dropped as they have in other parts of the country. One of the reforms that has stayed in place is part of the Medical Malpractice Reform Act of 1986 that allows physicians and surgeons to apply for excess coverage of $1.3M/$3.9M in liability limits over and above the required minimum of $1M/$3M liability limits if the underlying coverage is written with an admitted insurance carrier. This additional coverage is funded by the state, and approximately 10,000 New York physicians, surgeons, and dentists are participating.
Statute of Limitations
In New York, medical malpractice claims must be filed within 30 months of the date of the medical incident or omission. The 2 ½ year limitation is comparable to many other states’ statute of limitations. The reason the laws allow for this much time is that most medical malpractice claims are filed long after the care is received. In most cases, patients don’t know there has been a mistake, negligence, or omission immediately. There are exceptions to New York’s statute of limitations, such as when a foreign object is left inside the body in the case of surgery. In these cases, patients have 1 year from the date of discovery of the foreign object. Another exception is in cases involving children, which allows claims to be filed within 3 years of the child’s 18th birthday, but no longer than 10 years after the medical incident.
New York’s minimum liability limit for medical malpractice insurance is $1,000,000 per occurrence and $3,000,000 aggregate per policy period (1 year). The $1M/$3M limit is fairly standard across the U.S. In some states and mostly in rural areas, physicians are allowed to carry lower limits, but most physicians are not comfortable with lower limits. The argument for lower limits is that in the case of a lawsuit attorneys will only go after the amount of the policy limit, so the higher the limit the more money they will sue for. However, in today’s litigious environment, the $1M/$3M limit is recommended.
Many hospitals in New York require physicians to purchase a higher limit of $1.3M/$3.9M in order to obtain admitting privileges or to work in the hospital. Some hospitals may require an even higher limit of $2.3M/$6.9M.
Medical Malpractice Insurance Rates in New York
Medical malpractice insurance rates in New York are 20 – 50% higher than most of the average rates in the U.S. The number of malpractices claims, and severity of payouts has remained high, influencing malpractice insurance companies to hold the line on premiums. As with any other line of insurance, where there is a higher risk, there will be higher costs in obtaining insurance protection. For example, a Primary Care physician in New York pays anywhere from $17,000 to $40,000 per year for malpractice insurance with an admitted carrier. Primary Care physicians, including Internal Medicine, Family Practice, and Pediatrics, make up about 40% of the total medical malpractice insurance market in New York. The average rate for an Anesthesiologist in New York is approximately $40,000 per year, and the average rate for an OB/GYN is about $150,000 per year.
Physicians do have the option to choose insurance coverage with a non-admitted insurance carrier in New York. The coverage is offered through Risk Retention Groups (RRGs) and the rates are significantly lower. These alternative coverage options are increasingly accepted by physicians and hospitals in the state.
New York Counties
New York is no different than many other states in that the medical malpractice rates vary by county. Obviously, the rates are higher where there is a higher risk of a medical malpractice claim. The higher-risk counties are typically where the population is higher, and incomes are lower. The highest rated territories in New York are Manhattan counties and suburbs, Kings, Queens, Bronx, Long Island, and Richmond Counties. Rates are as much as 4 times lower in the upstate New York counties.
New York has 2 different types of insurance companies offering medical professional liability insurance: Admitted and Non-Admitted carriers. The difference is in the way the companies are licensed and regulated by the state of New York.
- Regulated by the state
- Rates filed with state and must be approved
- Participate in the state Guaranty Fund
- Qualify for excess coverage of state-funded $1M additional liability limit
- Approved by all hospitals as acceptable proof of coverage
- Risk Retention Groups (RRG)
- Lower rates
- Flexibility in rates
- Ability to cover higher risks
- Creative solutions in writing malpractice insurance
To address a medical malpractice crisis in the state of New York, the Medical Malpractice Reform Act of 1986 established the Medical Malpractice Insurance Pool (MMIP). The pool was designed to lower malpractice rates by offering physicians an extra layer of protection by providing excess coverage on top of their individual policy limits. The malpractice insurance crisis sparked concern that the quality of healthcare in New York would be negatively impacted if physicians stopped practicing medicine in the state because of high premiums, lack of insurance options, or fear of unlimited malpractice claims. MMIP also covers physicians that have been non-renewed or denied coverage by admitted carriers due to a high number of claims, practicing in high-risk areas or higher risk specialties. The MMIP was originally funded by hospitals but is now funded by the state of New York. Estimates indicate that the fund will cost well over $125 million per year in the coming years.
Types of Coverage
In New York, as well as most states, medical malpractice policies are written in 2 forms: Claims-Made policies (most common) and Occurrence policies.
- Claims-Made – Coverage is provided by the company the physician was insured with at the time of a malpractice claim. The medical care may have happened months or even years ago, but when the claim is made, the current insurance policy must provide coverage. Claims-Made policies are usually less expensive than Occurrence policies, but Tail Coverage is necessary when a policy is cancelled.
- Occurrence – Coverage is provided by the company the physician was insured with at the time of the medical care or incident. Occurrence policies can be more expensive in some cases, but there is no need to purchase Tail Coverage at the time of cancellation. The disadvantage can be if the doctor is no longer insured with the company or if it has become insolvent or doesn’t exist anymore.
- Tail Coverage – Also known as an Extended Reporting Endorsement, Tail Coverage is an endorsement to a Claims-Made policy that is added when the policy is cancelled. A Tail provides coverage for claims that may be reported after the cancellation date. Since most medical malpractice claims are filed months or even years after the incident, a Tail protects physicians into the future. They can be permanent or limited to 2, 3, or 5 years. Tails are often offered for free in the case of retirement, disability, or death, but in other cases, the premium can be as much as 200 – 300% of the policy premium at the time of cancellation. Some insurance carriers offer “Stand Alone Tails” which can be a lot less expensive.
Want to learn more about medical malpractice insurance policies in your state? Call our main office in St. Louis, Missouri, at (855) 823-5283 for all your questions about malpractice policies in New York. Get your free quote today!
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