Should Your Doctor Clients Go Bare?

Hospitals in Las Vegas are no longer delivering babies, surgeons in Pennsylvania are considering moving out of state, and Texas doctors and nurses are staging protest rallies, all because of the skyrocketing costs of medical malpractice insurance. Premiums are so high that in some cases doctors are better off going without, argues Marc Singer of Singer Xenos Wealth Management in Coral Gables, Florida, who works solely with doctor clients.

Does the mere idea give you the heebie-jeebies? It should. With the average jury award climbing by hundreds of thousands of dollars at the same time that doctors’ incomes are falling, according to Singer, advising a doctor client to go without malpractice insurance (otherwise known as “going bare”) hardly seems smart. Indeed, Memphis planner William Howard, who also specializes in working with physicians, says he has never recommended that a doctor client forgo her malpractice coverage. “I don’t think I could ever recommend that a client not have it,” he says, although he notes that his Tennessee-based doctors have not faced the exorbitant premiums Singer says his Florida doctors are up against. “If they’re have to pay 50% of the [amount of] coverage in premiums–and I haven’t seen this happen–then I could see that perhaps maybe it would make sense,” says Howard cautiously.

“It’s not the optimal situation,” concedes Singer. “But in some cases, it’s becoming a necessary situation” for obstetricians, neurosurgeons, orthopedic surgeons, and other physicians in high-risk specialties. Such doctors have watched their malpractice insurance premiums double and even triple recently, as insurance companies’ investment returns have bogged down with the markets, juries have offered increasingly large judgment awards, and some major insurers (such as the MIIX Group, which had covered nearly 40% of New Jersey’s doctors) have dropped out of the business entirely.

Consider the math, says Singer. If a doctor is now having to dish out $125,000 per year in premiums for $250,000 worth of coverage (which isn’t enough insurance to begin with, he adds; $1 million in coverage is more appropriate), it will only take her two years of squirreling away those premiums to save up the amount she was previously covered for by insurance. “Every two years that you don’t get sued, you’ve already banked the difference,” says Singer. “You’re probably not going to have a major lawsuit every two years, so it makes sense” to self-insure.