Going Bare May Carry More Risks than Rewards

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By Vanessa Orr

Tom Murphy

Tom Murphy

In the early 2000s, Florida faced a medical malpractice crisis when the number of insurance companies writing these types of policies fell from roughly 40 companies to less than five as the result of an overwhelming amount of claims and lawsuits. Many large payments were made, resulting in insurance companies rapidly increasing premiums, which then became unaffordable for Florida physicians.

As a result, many physicians chose to self-insure, or ‘go bare.’

“Florida is one of the few states in the country where physicians are allowed to self-insure; basically, they become their own insurance companies, paying for everything in the case of a claim or lawsuit,” explained Tom Murphy, producer, National Health Care Practice Danna-Gracey, a Division of Risk Strategies.

Over the last couple of years, medical malpractice rates have increased as a result of the Florida Supreme Court overturning tort reform in 2017, despite the fact that Florida voters overwhelmingly voted to place caps on noneconomic damages. While not as bad as in 2001-02, after 13 years of rate decreases, rates have increased for the past two to three years.

“The fact that the Florida Supreme Court declared tort reform unconstitutional opened the floodgates for more lawsuits and nuclear verdicts, which has resulted in insurance companies paying out more money, which trickles down to higher premiums for doctors,” said Murphy.

Physicians, especially surgeons, are once again thinking about going bare, but Murphy says that there are a lot to things to consider before they make that choice.

For example, every time that a Florida physician renews his or her license, they are required to notify the state if they have dropped their insurance. They must also carry a bond or letter of credit up to $250,000 in case of a judgement against them. If there is a judgement and the physician does not pay, they can lose their medical license within 60 days.

“Unfortunately, $250,000 may be inadequate,” said Murphy, noting that the average claim payment now equals $400,000. “What doctors also fail to recognize is that instead of focusing on the limits of liability, the real benefit of an insurance policy is that legal and claims expenses are unlimited with most carriers.

“If a case is significant and the injuries or damages severe enough, a very well-staffed and financed law firm will keep that physician in the lawsuit for as long as possible,” he explained. “The physician will be forced to pay an exorbitant amount for legal defense, and at some point will be looking to settle so as to not pay more legal fees, which can be hundreds of thousands of dollars.”

Murphy also noted that most hospitals and managed care companies now require physicians to carry malpractice insurance.

Despite a prevalent belief by doctors that not carrying insurance and implementing asset protection strategies will reduce the frequency and severity of claims against them, this is not always true.

“Doctors need to understand that the plaintiffs’ bar is very savvy, and they know what they can and can’t do with bare doctors,” Murphy said. “By going bare, physicians lose the professional and experienced claims and legal representatives that their insurance companies provide.

“They may also have a false sense of security if their assets aren’t properly protected,” he added, noting that due to changes in the law, plaintiffs’ attorneys can seek out and attach a medical practice’s accounts receivable.

So why go bare? It can save money on insurance costs, and in some cases, a physician could potentially be sued less because they are not carrying malpractice insurance. A physician may have more control over his or her defense and settlements, though a good insurance company will work with its physicians to come to an agreed-upon solution.

“Unfortunately, as the market deteriorates without tort reform or systemic change, it could be their only affordable choice,” said Murphy. “What’s important is that before making that decision, doctors do their homework. If going bare is something that they are considering, they need to understand the details of what is involved when one self-insures.” The act of self-insuring or going bare is simply the shifting of responsibility to all who carry malpractice insurance.

For more information, call Tom Murphy or Matt Gracey at 800-966-2120 or visit www.dannagracey.com.