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.
What doesn’t make sense, however, is for a family practitioner paying a $20,000 premium for $250,000 of coverage to go bare. “It would take a doctor 12 years to break even on that,” he says, “and that’s a long, long time.” Going bare is also not worth it for doctors who will be kept awake at night by the idea that they are uninsured. “It’s a psychological decision, not just a financial one,” says Singer. “It has a lot to do with emotional well-being.” And even hardy souls may be kept from self-insuring by their state laws; going without malpractice insurance is illegal in some states. Many hospitals and HMO plans will also toss uninsured doctors out on their ears, so it’s important to investigate these matters before advising a client to take the plunge.
For clients who do decide to risk it, going bare can have an added benefit of encouraging plaintiffs’ attorneys to settle cases rather than going for broke. Technically, plaintiffs’ attorneys have no legal right to ask whether a doctor is insured (or find out how much money he has) until after a court has ruled on the matter of his guilt or innocence, but “we’ll bring it up very early on,” says Singer. “We want to say, ‘Look, there is no pot of gold at the end of the rainbow. There is no million dollars that you are going to collect, or two million. So why don’t we settle for a reasonable amount.’”
Regardless of whether the doctor chooses to go bare or not, such decisions should be handled in the larger context of risk management and asset protection, says Singer. He advises all of his physician clients on strategies to protect their assets, including everything from the retitling of assets or the purchase a home (since a primary residence is a protected asset in Florida, which creditors cannot touch) to more complicated strategies such as the establishment of offshore accounts.